Economic War: China Retaliates against the EU's Taxes on Electric Cars!

The economic tug-of-war between the European Union and China is intensifying. The recent decision by the EU to impose tariffs potentially reaching 36.3% on Chinese electric vehicles is not just a protectionist gesture. It marked a strategic turning point in the battle for control of the global renewable energy market. In response, Beijing quickly countered with an anti-subsidy investigation on European dairy products. These retaliatory measures illustrate rising tensions that go beyond simple trade disputes and raise many questions about the future of Sino-European relations.

The facts : the escalation of trade tensions

The tensions between the European Union and China reached a new peak this week when the EU announced the imposition of tariffs on imports of Chinese electric vehicles. This decision, taken after a nine-month investigation, stems from suspicions of massive subsidies granted by Beijing to its electric vehicle industry. According to an official report, these subsidies distort competition and threaten European economic interests. In response, less than 24 hours after this announcement, China retaliated by opening an anti-subsidy investigation on dairy products imported from the EU, targeting European agricultural subsidies. “We will firmly defend the interests of the EU dairy industry and the common agricultural policy,” said Olof Gill, spokesperson for the European Commission. He emphasized the EU’s willingness to resist any external pressure.

This series of events highlights the complex dynamics between the two economic giants. Chinese manufacturers, already affected by a provisional surcharge introduced by the EU last July, saw their sales plummet drastically, with a 45% drop between June and July 2024. The situation in France reflects this trend, where measures like the new eco-bonus on vehicles produced in Europe have further exacerbated difficulties for Chinese models. The MG4, a popular vehicle in France, recorded a 33% drop in sales between January and July this year. Both parties now seem to be engaged in a spiral of measures and countermeasures, with potential repercussions for industries on both sides.

Strategic stakes and prospects

Beyond mere reprisals, this confrontation could mark the beginning of a broader trade conflict between the European Union and China. While Brussels says it is ready to explore “alternative solutions” in line with World Trade Organization (WTO) rules, Beijing shows little sign of easing its counter-strategy. “This trade war (…) may be inevitable,” said Josep Borrell, the EU’s High Representative for Foreign Affairs. This escalation raises concerns about broader economic consequences, particularly on global supply chains and financial markets already weakened by multiple economic crises.

For the European industry, a prolonged trade war could mean increased costs and a loss of competitiveness in the global market. For China, the stakes are equally high. European protectionist measures threaten to slow the international expansion of its automotive manufacturers. In this context, it becomes essential to closely monitor the next steps in this conflict. In the long term, such a war could not only reshape Sino-European relations but also have profound repercussions on the global economy, with strategic adjustments and a new reflection on international trade policies.

Both parties are at a critical crossroads. What began as a targeted dispute over the electric vehicle sector could quickly extend to other areas, with an escalation that holds unpredictable consequences. The outcome of this crisis will depend on the ability of the two economic blocs to balance the protection of their interests with maintaining global economic stability.