- BMW fears a trade war and the challenges it would pose to companies around the world
- Negotiations should resume next Monday
- Germany and Spain oppose tariffs
- German companies exported €26.3 billion worth of vehicles to China last year
BMW fears a trade war and the challenges it would pose to companies around the world
BMW has opposed the European Union's (EU) plan to impose higher tariffs on Chinese electric vehicles, fearing that it will provoke a trade war and hurt companies worldwide. BMW CEO Oliver Zipse and other German carmakers, such as Volkswagen and Mercedes, have stated that higher tariffs could negatively impact their business, especially given their heavy reliance on the Chinese market. China is not only BMW's main export market but also plays a crucial role in their production processes.
The German carmakers consider that tariffs to counter Chinese state subsidies for producing electric cars could undermine international trade relations rather than promote fair competition. Therefore, BMW has called on Germany to vote against the tariffs or abstain from supporting them to continue negotiations between the EU and China. This is the latest move by a major EU industry player to oppose a decision taken by the European Commission (EC), citing concerns about an escalating trade dispute[1].
In Zipse's view, the imposition of tariffs could not only damage the strong German export industry, but also "trigger a retaliatory response from China and thus deepen the rift".
However, the EU voted on Friday to allow tariffs of up to 35.3% on electric vehicles imported from China, which could pave the way for a protracted trade war with the Asian giant. The vote follows a year-long anti-subsidy investigation by the EC, which proposed the tariffs to counter what it considered to be unfair Chinese subsidies.
Negotiations should resume next Monday
Countries including France, Italy, Greece and Poland have indicated that they will maintain the tariffs. In principle, this would be enough to implement the EU's top-level trade measures. Germany voted against the proposal, along with Hungary, Malta, Slovakia and Slovenia. The Commission argued that tariffs are needed to avoid cheap loans, land and raw materials and other subsidies by introducing a level playing field. However, negotiations between the EU and China are still ongoing. The EC will now decide whether the import duties will enter into force at the beginning of November.
The Commission has said that the duties could be lifted if China coordinates with the World Trade Organisation (WTO) to address the EU's concerns. Beijing has also expressed interest in continuing negotiations, saying the tariffs would harm business relations[2].
"China hopes that the EU will recognize that the imposition of tariffs will not solve any problems but will only shake the confidence of Chinese enterprises and discourage them from investing and cooperating with the EU," the Ministry of Commerce said. China is indeed calling on the EU to translate its political will into action and to get back on the right track in resolving the trade spat through consultation.
The Commission's proposal can only be implemented if the 15 EU members, representing 65% of the EU population, do not vote against it by a qualified majority, which is a very high hurdle. Talks are due to resume on Monday.
Germany and Spain oppose tariffs
Germany, a major carmaker, has voiced strong objections, fearing that the tariffs could hurt its carmakers, which depend on the Chinese market. Hildegard Müller, President of the German Association of the Automotive Industry, called on both sides to avoid escalation and "ideally suspend the tariffs to avoid the risk of a trade war".
The tariffs range from 7.8% for foreign companies, such as Tesla, which produces cars in China, to as high as 35.3% for Chinese companies, which did not cooperate with the investigation. These tariffs are on top of the EU's standard 10% car import duty.
Spain's Economy Minister, Carlos Cuerpo, has written to European Commission Vice-President Valdis Dombrovskis asking for negotiations to be opened after the vote. Although the tariffs are said to be designed to protect European carmakers from unfair competition, with Chinese carmakers benefiting from heavy state subsidies, Beijing has opposed them, calling them "protectionist," and has threatened retaliation[3].
China has already launched investigations into imports of brandy, milk, and pork products into Europe, among other things, and has announced retaliatory measures. For its part, the European Commission has expressed its willingness to continue negotiations with China, including considering a minimum import price for electric cars.
One thing is clear: the delay reflects the different attitudes of EU Member States towards trade measures; after all, BMW and other German car manufacturers, which have a strong presence in China, are particularly exposed to tariff risks.
German companies exported €26.3 billion worth of vehicles to China last year
German carmakers, which sold a third of their sales last year in China, oppose the tariffs. They fear retaliation and a trade conflict with the country's second most important trading partner.
German companies exported €26.3 billion (US$29.10 billion) worth of vehicles and parts to China last year alone. Conversely, €6.8 billion worth of automotive goods flowed in the opposite direction, underlining the interdependence between the two markets. For BMW, which produces electric MINI Cooper and Aceman cars in China, any disruption could immediately impact its performance.
"We say unequivocally: tariffs are the wrong approach because they will not improve the competitiveness of the European automotive industry," said German trade union IG Metall.
