10/10 – International News Update

On Friday last week, the European Union member states held a vote and did not object to a proposal to introduce tariffs on electric vehicles manufactured in China. The bloc elected to take on the tariffs despite an expected effort by German Chancellor Olaf Scholz to prevent the move.

According to several diplomats familiar with the vote in the Trade Defence Instruments Committee, ten countries voted in favor, five opposed, and 12 abstained [Politico].

While there was no consensus either supporting or rejecting the tariffs, the committee issued “no opinion” on the European Commission’s proposal. This outcome allows the Commission to proceed with deciding on the next steps.

Following an investigation lasting nearly a year into the subsidies provided by the Chinese government to its electric vehicle industry, the Commission can now impose duties of up to 35.3%.

The legal text for these duties is expected to be published by the Commission before October 30, the deadline to conclude the investigation, with the duties taking effect the following day.

Negotiations could still be pursued to establish minimum price guarantees for Chinese electric vehicles, which could help mitigate the effects of state subsidies.

Friday’s vote resembled a non-binding vote held in July, with some key changes. Germany, Hungary, Slovakia, and Malta reportedly opposed the tariffs. Slovenia, which had abstained in July, voted against them on Friday. Additionally, Spain, following a call by Prime Minister Pedro Sánchez to reconsider the tariffs during a recent visit to China, changed its vote from supporting to abstaining.

This week, China hit back in a tit-for-tat move by imposing temporary anti-dumping measures on imports of brandy from the EU on Tuesday, hitting French brands including Hennessy and Remy Martin, just days after the vote [Reuters].

France’s trade ministry described the temporary measures imposed by China as “incomprehensible” and a breach of free trade principles. The ministry also stated that it would collaborate with the European Commission to challenge the action at the World Trade Organization.

It was also reported that an increase in tariffs on imports of large-engine vehicles is under consideration, a move that would disproportionately affect German manufacturers. Last year, German exports of vehicles with engines of 2.5 liters or more to China totaled $1.2 billion.

Meanwhile, France appeared to be the focus of Beijing’s investigation into brandy imports, likely due to its backing of tariffs on China-made electric vehicles. French brandy exports to China amounted to $1.7 billion last year, representing 99% of the country’s total brandy imports. [Reuters]