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China’s Tit for Tat Trade War With the EU

Published June 10, 2013

In 2018 China Car Times was acquired by Autowise. This article originally appeared on ChinaCarTimes.com.

Reports indicate that China is planning to increase tariffs on European made cars as a means to push the EU into not placing its own tariffs on Chinese made solar panels. Would China really want to cut off its supply of luxury vehicles to avoid tariffs on solar panels? We think not, not unless the local rival to the Audi A6, the Hong Qi H7, is really good.

From Reuters:

China may look into a complaint about luxury cars imported from the European Union, potentially escalating a trade dispute that started over solar panels and appears to be spreading to some of the most popular goods with wealthy Chinese.

The Chinese authorities, which on Wednesday launched a trade inquiry into sales of European wine, have received a complaint from an unknown person or persons over subsidies to cars imported from the EU with engines of 2 liters or larger, the European car industry association (ACEA) said on Friday, citing information from its Beijing office and legal counsel.

Chinas commerce ministry did not immediately reply to requests for comment, while a spokesman for the European Commission said it did not comment on speculation.

A Chinese source familiar with the matter, however, played down the risk of a formal investigation and any more duties on EU luxury car imports in the near future, adding Beijing was focused on talks to resolve the dispute over solar panels.

We have two months to find an amicable solution. If we cannot settle the problem in two months, I dont know, the source said, speaking on condition of anonymity.

Any investigation of EU luxury car imports could signal a shift in stance by China, whose inquiry into EU wine imports was viewed as targeting southern European states such as France and Italy that back duties on Chinese solar panels, while largely sparing northern countries such as Germany that oppose them.

The EU luxury car market is dominated by Germanys quartet of premium brands BMW (BMWG.DE), Daimlers (DAIGn.DE) Mercedes-Benz, and Volkswagens (VOWG_p.DE) Audi and Porsche as well as Italian marques like Lamborghini and Ferrari.

As you know, the main manufacturer of such cars is in Germany. It is unbelievable to have such a case right now, the Chinese source said.

Two EU trade diplomats also thought it unlikely that China would target EU luxury car imports at the moment.

You dont do things that deliberately rub your friends the wrong way, one said, also speaking on condition of anonymity.

But European carmakers remained on edge.

Some of the German members are taking this extremely seriously, an ACEA spokesperson said, citing their experience in 2011 when they were hit by Chinese import tariffs on their U.S.-built models like the Mercedes M-Class and BMW X5 SUVs.

Its a realistic threat.

Germanys VDA car industry association urged the EU and Chinese to resolve their differences over the negotiating table.

Punitive tariffs are a dead end, it said.

Audi, BMW and Ferrari declined to comment. VW, Daimler, Porsche and Lamborghini werent immediately available.

NEGOTIATING TACTICS

China imported 572,000 passenger cars from Europe and 10,100 commercial vehicles last year, according to consultancy LMC Automotive, though it could not provide a breakdown of models or manufacturers.

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