Washington (Brussels Morning) – The imposition of tariffs by the White House on Chinese imports, particularly in strategic sectors such as steel, aluminum, semiconductors, and electric vehicles, signals a significant shift in global trade dynamics. Despite targeting China’s new energy industry, these tariffs risk isolating the United States in the emerging green energy era while paradoxically contradicting its own decarbonization objectives. Moreover, the tariffs pose a threat to European automakers reliant on Chinese battery suppliers, potentially triggering a trade war with dire consequences for EU jobs and efforts to promote electric vehicles. As Europe grapples with the fallout, its strategic cooperation with China hangs in the balance, with implications for its broader foreign policy objectives and quest for strategic autonomy.
Amidst escalating tensions between the United States and China, exacerbated by the former’s imposition of tariffs on key green energy imports, a complex economic and geopolitical landscape emerges. This article delves into the ramifications of the White House’s tariff strategy, particularly its impact on China’s burgeoning electric vehicle (EV) industry and its ripple effects on global trade dynamics. Furthermore, it examines the paradoxical position of the United States in its climate change collaboration aspirations with China, juxtaposed against protectionist trade policies. As the world navigates this intricate web of trade dynamics, Europe finds itself caught in the crossfire, prompting a reassessment of its strategic alliances and pursuit of greater autonomy.
How effective are Biden’s tariffs on China’s EV industry given the current export numbers to the United States?
Upon the White House’s declaration that American tariffs on Chinese imports would persist and that fresh tariffs would be applied to strategic sectors including steel, aluminum, semiconductors, and electric vehicles, it is anticipated to deal a significant blow to China’s new energy industry. Ironically, while Chinese companies are encountering increasingly hurdles in accessing the US free market, Elon Musk’s Tesla has been granted the essential backing by the Chinese government to establish a new battery factory in Shanghai. Unfortunately, Biden’s tariff strategy may prove futile, as China currently exports a negligible number of electric vehicles to the United States. Data shows that in 2023, China’s export of new energy passenger vehicles to the United States was only 19,000, accounting for just 1% of its total exports. This proportion fell to 0.7% in the first quarter of 2024. In other words, what the United States has planned as a devastating hit to China’s EV industry might actually end up being just a minor prick.
Regardless of the reasons behind the White House’s decision to disregard world trade regulations, Washington has consistently crossed the “free trade” boundary for many years. Blocking green energy imports from China would not only contradict the Biden administration’s green energy and decarbonization objectives but also mark a significant departure from them. In 2023, China’s production and sales of new energy vehicles increased by 35.8% and 37.9% respectively, representing over 60% of global sales. This advantage is expected to persist for an extended period. During the same period, EVs only hold a 7.6% share of the total U.S. vehicle market.
How might Biden’s tariffs on Chinese green technology products affect European automakers and their supply chains?
The United States, in its pursuit of enhanced climate change collaboration with China, finds itself entangled in a paradoxical situation: by imposing high tariffs on green technology products from China, it restricts their access to the American market. This action inadvertently isolates the US in the emerging new energy era. The only explanation is that as Biden is so far lagging behind in the election, he needs to play the “China card” desperately, even a fabricated one, to bolster his waning popularity. By casting China as a scapegoat, he aims to rally voter support, oblivious to the fact that such antagonistic measures against China could inadvertently backfire, inflicting self-harm upon the United States.
Unfortunately, the bullet aimed at China has traversed America’s foot to strike Europe. The heightened tariffs not only target electric vehicles but also the batteries powering them. German automakers like BMW, Mercedes-Benz, and Audi, along with the US giant Tesla, and the Swedish brand Volvo are all customers of Chinese battery suppliers. Should retail price remains stable, these automotive companies would be left shouldering extra costs incurred from the tariff hike on Chinese batteries. Beijing, in this scenario, wouldn’t even need to retaliate directly against Washington or Brussels, as EU automobile companies will have to bear the brunt of American unpredictability.
How might EU tariffs on Chinese electric vehicles impact Europe’s strategic autonomy and economic interdependence with China?
The German Association of the Automotive Industry (VDA) has voiced disapproval regarding the EU’s imposition of additional tariffs on electric vehicles imported from China, saying it could trigger a trade war, endanger German jobs, and undermine the EU’s efforts to promote electric cars and transition to digitalization. Luca de Meo, Renault’s CEO, stated in March that relations with China will need to be managed, and completely closing the door to China would be the worst possible response. Apparently, Europe’s political elites seem unable to perceive the actual situation or choose to ignore it, opting to align themselves with the Americans. European Commission President Ursula von der Leyen recently hinted that the EU might impose tariffs on Chinese electric cars. In fact, her statement is not surprising. The post-World War II transatlantic alliance and China-Europe institutional differences have prompted Europe to align with the U.S. stance against China at a critical moment.
When Trump withdrew from the Paris Agreement and Biden signed the Inflation-Reduction Act, Europe felt betrayed once again. On the other hand, Beijing has always stood by Europe on climate issues. China and the EU quickly joined forces to form a “green alliance” to combat climate change. According to Eurostat, in 2023, China was the largest partner for EU imports of goods (20.5% of total extra-EU imports) and was the third largest partner for EU exports of goods (8.8% of total extra-EU exports). It is clear that China and the EU are economically interdependent. Throughout the Cold War era, the development of Europe was significantly shaped by the tensions between the United States and the Soviet Union, fostering a strategic leaning towards “multipolarity” and the “European Union” to counter external risks.
EU policymakers should be clear that curtailing the scope of China-EU strategic cooperation means fewer options in EU’s foreign policy. The level of strategic autonomy Europe aspires to achieve is inherently tied to the breadth of its external partnerships. As relations with China falter, Europe inches closer to a scenario where it relies more on the United States, a reliance that has historically proven costly. As the ” Trumpism” of US politics has been a constant concern for Europe, the latter should be wise enough to decide how to increase its options and autonomy.
