If the goal of the tariffs on Chinese electric vehicles is to prevent the global auto industry from falling under total Chinese domination, a concerted strategy by countries that feel threatened might have had a better chance of success than scattered shots that risk missing the target.
The enemy may be clearly identified, but the way to confront it is not unanimous.
Mexico, a partner of Canada and the United States in a free trade agreement crucial to the economies of the three countries, has no intention of blocking the path of Chinese automakers. On the contrary, it wants to offer help to the giant BYD to establish itself on its territory, which is already home to several other automakers, including Volkswagen and GM.
Like Canada, the Mexican federal government is under pressure from the Americans not to provide financial aid to BYD, but several of the country’s states are competing to offer the manufacturer “different benefits”, fiscal and otherwise, reports Reuters, citing BYD’s general manager in Mexico.1.
BYD’s intention is probably not to go through Mexico to invade the American market, which would be difficult anyway given that the United States and Canada have come out with the bazooka with 100% tariffs, which will double the price of Chinese electric cars. But the company still wants to establish itself in Mexico from where it can shine on the South American markets.
The European Union, where Chinese cars already have a presence on the market, has adopted a different strategy. After investigating the state aid that Chinese manufacturers receive, the European Commission plans to impose targeted customs duties depending on the manufacturer and varying between 17% and 38%.
The market share of Chinese cars in the European market rose from virtually zero in 2019 to 7% last year, according to official statistics. Despite these Chinese gains, major European carmakers BMW, Mercedes-Benz and Volkswagen are opposing the tariff increase because they fear a major trade conflict that would cause them to lose access to the Chinese market.
The European approach seems more cautious, also considering environmental issues. If there is an urgent need to electrify the vehicle fleet, it is not by completely preventing Chinese competition that we will achieve this.
The UK, for its part, is playing its own part. The government says it has no intention of following the European Union and imposing tariffs on Chinese electric cars. For now, at least. An investigation into whether the Chinese are actually dumping on the British market is nevertheless being considered.
The rules of the World Trade Organization (WTO), of which China is a member, are clear on this point. A country cannot export its products at prices lower than those of its domestic market.
One might wonder why countries that feel threatened by Chinese-made electric vehicles did not first focus on concerted action at the WTO, rather than acting individually. But it is true that when you yourself give billions to manufacturers to attract them to your territory, you are in no position to criticize the Chinese government for subsidizing its automobile industry.
The world has given itself trade rules that must be followed, even if the process is long and painful and the results are not guaranteed. Nor is a war with prohibitive tariffs likely to prevent the Chinese auto industry from thriving.
1. Read the text from the Reuters agency (in English)