China is considering higher tariffs on imported gasoline-powered EU cars with large engines, mainly targeting German automakers, in response to the European Union’s recent decision to impose tariffs on Chinese electric vehicles. The move is part of a growing trade dispute between the two economic giants, with China also announcing a deposit of up to 39 percent on spirits imports from the EU.
According to a statement from China’s Ministry of Commerce, the country is considering measures to raise tariffs on imported gasoline cars with engines of 2.5 liters or more. This would likely hit German automakers such as BMW and Mercedes-Benz the hardest, as they export a significant number of vehicles with large engines to China. In 2023, German exports of vehicles with engines of 2.5 liters or larger to China will reach $1.2 billion.
The EU’s decision to impose tariffs of up to 45 percent on Chinese electric vehicles for five years has been met with strong opposition from China. Beijing has been vocal about its disapproval, with state media suggesting the country may raise tariffs on auto imports in response. The statement from the Ministry of Commerce is the first official confirmation of the plan.
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In addition to targeting EU cars, China is also taking aim at European spirits exports. The country has announced a deposit of up to 39 percent on brandy imports from the EU, effective October 11. The move is seen as a response to France’s support for tariffs on Chinese-made electric cars. French brandy shipments to China reached $1.7 billion last year, accounting for 99 percent of the country’s imports of the spirit.
China’s anti-dumping investigation into European brandy, launched in January, found that European distillers had been selling brandy in China at a dumping margin of between 30.6 percent and 39 percent. The country’s Ministry of Commerce claims that this has damaged the domestic industry.
The escalating trade tensions between China and the EU have led to a decline in the shares of European carmakers and brandy companies. Shares of BMW fell 3 percent, while Mercedes-Benz Group fell 2.6 percent. Remy Cointreau, a French spirits maker, slumped more than 8 percent.
Talks between the two sides are ongoing as the trade dispute continues to escalate. China’s announcements may be an attempt to put pressure on the EU to find an alternative to the tariffs. However, with the EU’s final decision on the tariffs expected by October 31, it remains to be seen how the situation will play out.
In a statement, French President Emmanuel Macron defended the EU’s decision to impose tariffs on Chinese electric vehicles, saying it was necessary to maintain a level playing field. He also dismissed China’s brandy investigation as “pure retaliation.”
The European Commission has yet to respond to China’s latest move, but it is clear that trade tensions between the two economic giants are far from over.