THE GIST
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Germany wants to limit China more than what the European Union already proposed. Berlin is pushing Brussels to think beyond cars, and impose safeguard quotas on more Chinese imports including chemicals, mechanical engineering and even pharmaceuticals. It’s asking Brussels to send proposals by the year-end. For an export-driven economy long cautious about antagonizing Beijing, this is a sharp reversal for Berlin.
WHAT HAPPENED
The EU’s trade deficit with China hit a record $35 billion in September. Meanwhile, China’s global export surplus grew 8% annually to $938 billion. The German Chancellor Friedrich Merz told its parliament that it would “no longer stand idly by” while subsidies and overcapacity hurt its economy, while Beijing pockets all the profits.
But this anti-China tirade has forced Europe to cooperate with their neighbors. Both Merz and French President Emmanuel Macron are expected to trade concessions soon: France moves toward Germany on phasing out combustion engines, and Germany eases its opposition to “Buy European” rules.
Earlier this month, the EU agreed to cap Chinese hybrid imports at 350,000 a year for four years, rising 6% annually from year two. Brussels set hefty additional tariffs on Chinese electric cars in 2024, alleging unfair state subsidies. But hybrid cars escaped the tariffs, and Chinese brands swooped in and took about a quarter of European hybrid sales in August. Brussels is rushing to fix that loophole now.
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WHY IT MATTERS
So why is this important for Berlin? Because German carmakers are in a pickle with Chinese hybrids taking over. Chemicals and machinery are the core of German industrial exports and the heart of its mid-sized firms. Berlin has to defend its industrial base at home, not just its export access abroad.
And Germany is playing it smart by proposing limits rather than anti-dumping duties. Because those require proof of below-fair-value pricing, and countervailing duties require proof of subsidies. They are investigated product by product, producer by producer. Ain’t nobody got time for that. Instead, caps need only a surge in imports as validation. It lets the bloc restrict a sector’s imports after such a surge. It is faster, covers whole sectors and is time-limited.
WHAT’S NEXT
Merz and Macron will meet this week to discuss a mandate that makes the commission draft stricter measures. It has until the end of the year-end to name specific sectors like chemicals and pharma. Until then, more regional cooperation shouldn’t come as a surprise.
Source: finance.yahoo.com
