Habeck says EU tariffs on Chinese cars not a ‘punishment’

The European Union is not punishing China by imposing tariffs on Chinese-made electric vehicles (EVs), Germany’s economy minister Robert Habeck said in Beijing on Saturday.

His comments follow EU plans to levy tariffs on imports of Chinese EVs to counteract overcapacity in the auto sector, which Brussels says is caused by Chinese carmakers dumping cheap cars on European markets.

What did Robert Habeck say?

Speaking during a visit to China, the vice chancellor called on Beijing to take the findings of the European Commission, the EU’s executive arm, seriously.

“It is important to understand that these are not punitive tariffs,” Habeck, who also serves as German economy minister, said.

He said the Commission had spent nine months probing in detail whether Chinese car manufacturers benefit unfairly from large government subsidies.

Any duties imposed following the EU review “is not a punishment,” he said, but to compensate for the advantage Chinese carmakers receive from the subsidies.

Habeck told Chinese officials that it was vital for Brussels to try to maintain a level playing field for the auto industry in Europe.

“Common, equal standards for market access should be achieved,” Habeck said.

Fears that China overtaking car country Germany

Habeck also restated his warning that China would face economic consequences for its support for Russia in the war on Ukraine, referring to how EU states were cutting their reliance on Chinese imports.

“We would proceed differently and certainly not quite as hard when analyzing where we have dependencies on raw materials and technical goods if this war or China’s support for Russia in this war did not exist,” Habeck emphasized.

He said German and European security interests are directly affected by the conflict, which has been raging for two and a half years.

Habeck was speaking at a plenary session of a climate and transformation dialogue in Beijing.

What has the EU accused China of doing?

In October, the Commission said it would carry out an anti-subsidy investigation of Chinese EVs imported into Europe.

Commission President Ursula von der Leyen warned that the “global market is flooded with cheaper electric vehicles.”

She said the price of the vehicles is “kept artificially low’ owing to “huge state subsidies,” from Beijing.

Last week, Brussels announced plans to levy tariffs on imports that will vary by Chinese automaker, depending on their adherence to EU trade rules.

Provisional duties of up to 38% are set to take effect on July 4.

The EU’s investigation is set to continue until November when definitive duties could be imposed for up to five years.

During its meteoric economic rise, China has repeatedly been accused of unfair trade practices, including dumping cheap goods — from shoes to solar panels — on the global market and violating the intellectual property rights of Western brands.

Washington, meanwhile, has imposed 100% tariffs on Chinese electric vehicles, a move that has effectively shut them out of the US market.

How has Beijing responded?

Ahead of Habeck’s visit, China warned that escalating frictions with the EU over EVs could trigger a trade war.

On Saturday, Zheng Shanjie, chairman of China’s National Development and Reform Commission, denied accusations of unfair subsidies, telling the same session that Beijing would do “everything to protect Chinese companies.”

The auto industry growth “is the result of competition, rather than subsidies, let alone unfair competition,” Zheng said.

He added that the proposed tariffs could hurt both sides and he hoped Germany would demonstrate leadership within the EU and “do the correct thing.”

Chinese Commerce Minister Wang Wentao, later said he would discuss the tariffs with EU Commissioner Valdis Dombrovskis on Saturday evening via videoconference.

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