German Industry Vulnerable to Chinese Retaliation

After several weeks of escalating tit-for-tat trade war salvos between China and Europe, threatening to scuttle billions in auto trade between the two blocs, over the weekend China agreed to enter talks with the EU over its decision to impose higher tariffs on imports of Chinese electric vehicles during a visit to Beijing by Germany's vice-chancellor, which was aimed at soothing tensions.

Robert Habeck, Germany's minister for economic affairs and climate action, the same minister who was crucified by Deutsche Boerse CEO Theodor Weimer in his recent rant, welcomed the move by China to enter discussions with Brussels on EU tariffs but said it was "a first step and many more will be necessary".

His comments came after China's ministry of commerce said Beijing and Brussels had agreed to launch consultations on an anti-subsidy investigation launched by the EU last year. The probe led to a decision this month to increase tariffs on Chinese EVs to as high as 48%, which in turn provoked China's anger and threats to retaliate in kind on Europe's internal combustion cars. The announcement followed a video conference between China's minister of commerce Wang Wentao and EU executive vice-president and trade commissioner Valdis Dombrovskis.

As previously reported, Germany - whose economy has been in peril for the past 2 years caught by the double whammy of soaring energy prices and shrinking Chinese imports of German goods - has been critical of the EU's decision to increase tariffs on imports of Chinese EVs and Habeck is the first senior European politician to visit the country since the extra duties were announced.

The Chinese market is crucially important for Germany's vast carmaking industry, making Berlin particularly vulnerable to any retaliatory measures by Beijing, which has already announced its own anti-dumping investigation into EU pork products.

While he struck a conciliatory tone on tariffs, which are yet to be finalized, Habeck was also critical of China's growing exports to Russia and cited Germany's efforts to stop exports of "dual-use" goods with potential military applications.

"I looked at the trade figures and Chinese trade with Russia increased more than 40% last year," he said. "Of course energy is a high part [of] it, but something like half of it is related to dual-use goods. These are technically goods that can be used on the battlefield and this has to stop."

Spoiler alert: it won't stop since Germany needs Chinese buyers more than China needs to placate Germany. China is one of Germany's largest trading partners and Berlin has sought to carefully navigate rising tensions between Beijing and Washington that increased sharply following Russia's invasion of Ukraine in 2022.

According to the FT, Habeck also visited Beijing where he met Wang Wentao and Zheng Shenjie, head of the National Development and Reform Commission. He said they spoke about energy and climate issues as well as human rights with Chinese officials as part of "intense discussions".

However, as DW reports, a planned meeting with Premier Li Qiang did not materialize with Premier Li Qiang was cancelled at the last minute without explanation, in a clear snub at Germany.

On Sunday, the German vice-chancellor said China should find a safe alternative to coal after the country ramped up production of the carbon-intensive fuel source. "Without China it would not be possible to meet the climate targets globally," he said during a visit to Hangzhou, according to a Reuters report.

While Joe Biden imposed tariffs of 100 per cent on Chinese electric vehicles this year, higher than the EU, though the US imports much smaller volumes.

Olaf Scholz, Germany's chancellor, met President Xi Jinping in April and encouraged China's president to pressure Russia to end its campaign in Ukraine. Absolutely nothing came out of that, which is understandable since Scholz also petitioned Li for greater market access for German companies in the mainland. Perhaps someone should explain to Germany that when you are begging for concessions, you can't also be demanding conditions.

Meanwhile, Xi and his Russian counterpart Vladimir Putin have trumpeted their close relationship and sworn to increase trade. Russia became China's fifth-biggest single-country trading partner last year, up from ninth in 2020, as trade reached $240bn. Chinese exports to Russia rose 46.9 per cent in 2023 year on year, according to official data. Much, if not all of this increase in trade between China and Russia, has come at the expense of the increasingly spineless and irrelevant Germany.

By Zerohedge.com 

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