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On the precipice of an all-out trade war with the European Union, China is panicking and dangling perks for German carmakers to try to bring things back from the brink.<\/p>\n
The world\u2019s second-biggest economy proposed lowering its existing 15% tariff on imported large engine vehicles from EU countries in an effort to convince Germany to get the EU to scrap tariffs announced last week of up to 38.1% on Chinese EVs<\/a>, Bloomberg<\/em> reported<\/a>, citing people familiar with the discussions.\u00a0<\/p>\n China\u2019s Commerce Minister Wang Wentao reportedly proposed the agreement in a meeting with German counterpart Robert Habeck in Beijing over the weekend, according to one of the people cited by Bloomberg<\/em>. It\u2019s unclear whether the incentive, which would greatly benefit German automakers, will change the EU\u2019s position, but it could convince Germany to use its leverage as the bloc\u2019s biggest economy to possibly change the terms before the tariffs are set to take effect on July 4.\u00a0<\/p>\n China\u2019s incentive approach is a stark contrast from its knee-jerk reaction following the announcement of the EU tariffs last week. After the EU voted to impose tariffs of up to 38.1% on Chinese-made cars produced by some of the country\u2019s biggest automakers, China announced an anti-dumping probe<\/a> on pork imports from the EU. More than half of all pork imports to China, the world\u2019s largest pork consumer, came from the EU last year, according to Chinese customs data. China has also threatened to raise tariffs on large engine vehicles to as high as 25%, which would directly affect German carmakers.<\/p>\n Whether with incentives or threats, China is desperate to scrap the EU tariffs. From January to April, 37% of Chinese EVs were exported to EU member states. Chinese automakers are already facing 102.5% tariffs instituted by President Joe Biden last month and Canada said Monday it was considering<\/a> levying its own tariffs on Chinese EVs as well.\u00a0<\/p>\n The incentive of lowering tariffs on vehicles imported to China is also tempting for German automakers. Sales to China made up about one-third<\/a> of all German car sales last year, but once-dominant German carmakers are increasingly facing pressure from cutthroat Chinese car companies<\/a>.\u00a0<\/p>\n Last year Volkswagen<\/a> was replaced<\/a> as the top-selling car brand in China by domestic player BYD<\/a>. For cars above $34,500, German brands\u2019 market share fell to an estimated 45% in 2023, compared to 60% in 2020, the Wall Street Journal <\/em>reported<\/a>, citing data from Bernstein.<\/p>\n Lower tariffs could help provide a boost to German automakers battling against competitive Chinese players. The German Association of the Automotive Industry has already come out with a statement to make it clear the new tariffs could do more harm than good.\u00a0<\/p>\n \u201cThe potential damage that could be caused by the measures now announced may be greater than the potential benefits for the European \u2013 and in particular the German \u2013 automotive industry,\u201d the association said in a statement<\/a>.\u00a0<\/p>\n Despite the harsh rhetoric between the EU and China, there may still be hope the two can avoid an all out trade war. Brussels and Beijing will begin talks<\/a> over the EV tariffs this week, according to a statement from China\u2019s Commerce Ministry.\u00a0<\/p>\n In the meeting over the weekend with Germany\u2019s Habeck, China Commerce Minister Wang said China was open to negotiations but also warned that it was not afraid to retaliate.<\/p>\n \u201cIf the EU is sincere, China hopes to start negotiations as soon as possible; if the EU insists on its own way, China will take all necessary actions to defend its own interests,\u201d Wang said, according to Chinese state media.<\/a><\/p>\n<\/div>\n