EU boss: China must “adapt behaviour’ over tariff hikes on EVs

China must “adapt its behaviour” to solve an escalating tariff row with Europe, European Union (EU) chief Charles Michel said on Friday, warning of the dangers of the dispute escalating into a full-blown trade war.

Understanding

The European Council president met Chinese Premier Li Qiang on the margins of a Southeast Asian summit in Laos as Beijing and the European Union impose tit-for-tat penalties on each other’s imports in a row about subsidies and protectionism.

Michel said in an interview with AFP that after his “frank and candid” talks with Li, he hoped a deal could be struck in the coming days or weeks, but he warned that getting there would be tough.

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“I have the impression that the door is not closed, but it’s a very difficult situation, it’s very challenging,” he said.

“We count on China to adapt its behaviour and to understand that we have to rebalance the economic relationships for more fairness, for fair competition, for a more level playing field.”

Looming trade war?

China and the 27-member bloc are vehemently at odds over Beijing’s generous subsidies for its industries, which Brussels says unfairly undercut European competitors.

Brussels has decided to impose swingeing new tariffs of up to 35.3% on imports of Chinese-made electric cars.

A furious Beijing has responded with new tariffs on EU-made brandy, alarming French producers, while Brussels is also investigating Chinese subsidies for solar panels and wind turbines.

China is also tangled in a bitter, wide-ranging trade dispute with the United States, with Washington announcing sharp tariff hikes targeting $18-billion of Chinese goods including electric vehicles, EV batteries and solar cells.

In his opening remarks at their meeting in Vientiane, Li told Michel that China was “willing to continue to work with EU leaders to further consolidate the stable and positive momentum of China-EU relations”.

Defend EU interests

With the global economy rattled by conflict in Ukraine and fresh turmoil in the Middle East, Michel said it was better for all to avoid a trade war.

But he insisted the EU would no longer be “naive” about massive government subsidies, though he offered some hope the two sides would find a way out of the row.

“I still hope that it will be possible in the days to come, in the weeks to come, to make an agreement to find some solutions,” he said.

“But we have very strong and legitimate interests and it is the responsibility of the European Union to defend our people, to defend our citizens.”

The EU has said it will challenge the “unfounded” measures at the World Trade Organisation.

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