With billions of dollars in trade between China and the European Union at stake, Germany’s second-highest cabinet official on Saturday called on the two sides to engage in talks to try to resolve an escalating tariff dispute.
Robert Habeck, who is Germany’s vice chancellor and minister of economic affairs and climate, said he expected talks between China and European officials to begin soon. He expressed hope that the tariffs could be avoided.
But he added that tariffs could be justified if the Commission’s concerns about China’s subsidies to its electric car industry are not resolved.
This month, the European Commission, the European Union’s executive body, proposed tariffs of up to 38 percent on electric cars from China, on top of the existing 10 percent tariff on imported cars. The commission said it found that China’s electric car industry was heavily subsidized by the government and state-controlled banking system.
“These tariffs are not punitive,” Mr. Habeck said, adding that the tariffs are intended to offset subsidies that violate World Trade Organization rules.
China’s Commerce Minister Wang Wentao, who met with Mr Habeck, accused the European Union of violating WTO rules and called the tariffs protectionist.
The National Development and Reform Commission, China’s top economic planning agency, said in a statement that “China will take all measures to protect the legitimate rights and interests of Chinese companies.” He added that the tariffs were inconsistent with international efforts to tackle climate change.
There is no doubt that the tariffs put Germany in a difficult position. China’s electric vehicle exports are a growing challenge for European automakers, including Germany. But German automakers have extensive operations in China and are worried they will be hit by Beijing’s retaliatory trade actions.
Mr Habeck visited several of China’s most influential finance ministries on Saturday in Beijing, but conspicuously did not meet with Premier Li Qiang, China’s No. 2 official. Mr. Habeck then flew to Shanghai, arriving earlier than expected to hold a press conference.
Mr Habeck declined to comment because he had not met Mr Lee, who is in some ways his counterpart.
Mr Habeck criticized China for supplying Russia with goods that have both political and military applications for its war against Ukraine. China’s trade with Russia grew more than 40 percent last year, and half of the increase is related to these dual-use goods, he said.
“These are technical goods that can be used on the battlefield and this must be stopped,” he said.
Mr. Habeck is scheduled to speak Sunday in Shanghai with German businessmen and then visit nearby Hangzhou, a technology hub.
WTO rules allow for tariffs intended to offset the effects of subsidies. For its part, China denies that it improperly subsidizes its electric vehicle companies and says that its leading role in the industry worldwide is the result of efficient manufacturing and innovation.
Anticipating the tariffs, China’s commerce ministry in January took the first steps toward imposing tariffs on imports of cognac and other spirits, mainly made from France, one of the countries that led to calls for tariffs on China’s electric cars. On Monday, China’s commerce ministry threatened to impose tariffs on pork imports from Europe.
And state-controlled media in China reported last week that the Chinese auto industry is asking the Commerce Ministry to impose tariffs on gasoline car imports from Europe, a move that would mainly affect German automakers.
Mr Wang, the trade minister, called on Germany to help end EU tariffs. “It is hoped that Germany will play an active role in the EU and promote the EU and China to move with each other,” the ministry said in a statement on Saturday.
China, the world’s biggest car market, has almost halved imports of German cars over the past five years as its domestic automakers become increasingly competitive. China’s auto companies dominate global production of electric and plug-in hybrid gasoline-electric vehicles, which now nearly match gasoline car sales in China.
But many of China’s wealthiest customers still want the German brands. Mercedes sells more of its most luxurious cars, the German-made Maybach, in China than in the rest of the world combined.
German automakers also have joint ventures with Chinese companies to assemble cars in China. Volkswagen is making further major investments in manufacturing and engineering in China, while starting to cut staff in Germany.
Germany is crucial to China’s efforts to stop the finalization of new European tariffs this autumn. This also happened the last time China and Europe engaged in a major trade dispute.
In 2013, under pressure from China, Germany rallied European governments to reverse the European Commission’s proposed tariffs on solar panels from China. Chinese solar panel manufacturers quickly overwhelmed Europe and the European industry collapsed.
Leaders in Europe pushing for tariffs on China’s electric vehicles argue that the European auto industry now faces a similarly dire threat.
To block the tariffs, Beijing needs to convince a majority of European Union countries, representing at least 65 percent of the bloc’s population, to bypass the European Commission.
In its response to Europe’s tariffs, China is expected to target key countries, analysts said.
Potential tariffs on petrol cars would hit Germany, the bloc’s most populous country, with 19 percent of the Union’s population. Italy is third in population and also exports luxury gasoline vehicles to China — Ferrari and Lamborghini sports cars.
France is Europe’s second most populous country and potential tariffs on China’s cognac target one of its national symbols.
Spain, the fourth most populous country in Europe, is the top European exporter of pork to China, a product that Beijing has also threatened to punish.
German automakers have long played a central role in China’s industrial development. When the country began opening up to international trade nearly half a century ago, Chinese officials were wary of automakers from Japan because of long-standing hostilities and suspicious of those from Detroit because of concerns about American military power in East Asia.
Beijing has allowed German automakers, led by Volkswagen, to open car plants with Chinese manufacturers, bypassing China’s 100 percent tariffs on imported cars. China cut tariffs on imported cars to 25 percent in the years after joining the World Trade Organization in 2001, and in 2018 further cut tariffs on most imported cars to 15 percent in a move to ease trade tensions with the United States States during the Trump administration.
But Beijing has continued to pressure foreign automakers to build cars in China using almost all parts made in China. Volkswagen said a decade ago that cars assembled by its joint ventures in China were close to 99 percent of local parts.
In addition to the 15% tariffs, China also collects a 10% tax from buyers of gasoline cars. Cars and sports vehicles with very large petrol engines, which are mainly imported, pay an additional tax of 40 percent.
Li You and John Lew contributed to the research.
