The trade dispute between the two powers is intensifying with China flooding Europe with heavily subsidized industrial goods, prompting the EU to consider punitive tariffs. There is a risk of a spiral of sanctions between the two entities. China’s Prime Minister Li Qiang recently visited the Beijing Auto Show, urging Chinese electric car manufacturers to modernize and innovate constantly.
China’s leaders envision a growth model for the future focused on modern industries like mechanical engineering, robotics, and green technologies. This shift aims to create a broad industrial base and reduce dependence on foreign countries. However, with the ongoing crisis in the real estate sector and excess industrial capacity, the Chinese government is pumping resources into industry expansion to stimulate growth.
The EU, concerned about its dependency on China and the impact of heavily subsidized sectors like semiconductors and electric cars, has initiated investigations into Chinese companies benefiting from state aid. The EU is considering punitive tariffs on Chinese car manufacturers to address the issue of unfair competition. However, this stance has divided Europe’s auto industry, with some countries like France supporting tough action against China while others worry about potential countermeasures.
Some economists believe that addressing the issue of Chinese subsidies requires better framework conditions and infrastructure investments, rather than forced industrial policies. There are concerns that punitive tariffs could escalate tensions and lead to a spiral of sanctions. As the EU Parliament elections approach, the decision on tariffs against China’s auto sector remains uncertain, with potential implications for the future of EU-China trade relations.