Trade Guys Say EU Tariffs on Chinese EVs Counteracting Overcapacity

The Center for Strategic and International Studies think tank's "Trade Guys" podcast said that the EU's tariffs on Chinese-made electric vehicles (see 408200020) "is sort of a preview of coming attractions."

Scott Miller, one of the two podcast hosts, said it's a bit hypocritical to impose subsidies on Chinese vehicles, given that the EU and U.S. are engaging in green industrial policy. "Frankly, as I see it, subsidies are all the way down," he said last week. "This is an industry that is subject to government distortion on all sides."

However, Bill Reinsch, an international business expert at CSIS and former Senate staffer and Commerce Department official, said that the EU action follows the rules for trade remedies set out at the World Trade Organization. The Chinese government is contesting that, and there are negotiations between China and the EU on whether a settlement can be reached. He said he thinks reaching such a deal, such as voluntary export restraints by China, would be hard, but added: "Don't rule it out."

"From the European perspective, this is all part and parcel of the Chinese overcapacity problem," he said. And Reinsch said the economic bloc and the U.S. aren't the only ones trying to push back on low-price exports from China that were produced by companies that didn't have to make profits because government subsidies prop them up.

He said India, Brazil, South Africa and Indonesia are all taking actions, though sometimes on a different product -- textiles in the case of Indonesia.

Reinsch said preventing Chinese dominance in any sector needs more coordination than has gone on so far. "If you can't approach this problem collectively, then each country is just squeezing the balloon, and it just pops out somewhere else," he said.

Reinsch contrasted the EU's proposed tariffs with the U.S. approach, which was to impose a 100% tariff on EVs made in China under the Section 301 investigation. He characterized that 100% tariff as high enough to keep Chinese-made EVs out of the U.S., and said it didn't follow international trade law.

In the case of the EU, he said there's "a real question as to whether the tariffs are high enough to keep the Chinese out of the market," but said to its credit, the EU says preventing competition isn't the point, it's allowing domestic EV manufacturing to compete equally with Chinese cars.

He called it "a fundamental difference between the U.S. and the Europeans."