Trade War Watch 23: EU, Deaf To Obama's Tire Defeat, About To Lose Car Exports In Trade War With China

Bertel Schmitt
by Bertel Schmitt

Nice car you’ve got here

After newly elected President Barack Obama slapped a punitive tariff on made-in-China tires, China looked for a good tit-for-tat and quickly found one: The US imported $1.8b worth of Chinese tires in 2009, while China imported $1.1b worth of US-built cars in 2008. A retaliatory tariff was slapped on Escalades et al. Now, the same is about to happen to BMWs and Benzes coming from Europe.

“China is considering imposing import duties on high-end European cars following complaints over subsidies that enable EU carmakers to sell in China at a loss,” Reuters reports. That, of course, is only half of the story. The EU slapped a punitive tariff on made-in-China solar modules, despite opposition from a majority of EU countries, most notably Germany. Not surprisingly, China fights back.Trade tensions between the EU and China have been brewing for a while. In retaliation for the solar module tariff, “China opened an anti-dumping and anti-subsidy inquiry this week into sales of European wine,” says Reuters. That would hurt mainly France and Spain.

Today, Europe’s auto manufacturer assosciation ACEA told Reuters that an unknown person or persons filed an anti-dumping complaint with China’s Ministry of Commerce that focuses on cars with engine displacements of 2 liters and more built in the EU and exported to the People’s Republic. “If there is not an improvement in the political climate, if it becomes a real trade war (…) if that is going to be the position and the strategy of the EU, then I think the Chinese will retaliate for sure,” said an ACEA spokesperson.

Trade action against luxury cars would hit Germany like a bomb. Higher end BMWs, Mercedes-Benz, and Audi cars are imported to China, while lower rungs are made locally. All Porsches are imported. Volkswagen’s Phaeton, a tough sell elsewhere, is popular in China, and it is imported. The Volkswagen Touareg and its sibling, the Porsche Cayenne, are imported to China.

China’s People’s Daily said yesterday that China has “has ample cards in hand” to play in the poker with Brussels, and a tariff on imported luxury card looks like a royal pain, or a royal flush, depending who’s side you are on. And if tariffs don’t do it, there could always be a few spontaneous demonstrations in Chinese streets, along with a ritual torching of an S-Class Benz and a Siebener. German automakers can ask their Japanese colleagues what that did to the sales. In 2011, EU car exports to C hina amounted to roughly $24 billion.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Vega Vega on Jun 07, 2013

    When it comes to tires, the EU was smarter. The new tire labeling program is an effective consumer level barrier against cheap, low-tech competition from China. All that without starting a trade war.

  • Type57SC Type57SC on Jun 07, 2013

    the wine tax makes more sense since the germans were against the solar shot. why would china try to piss of germany if germany was the one supporting their position?

  • Honda1 The FJB Inflation Reduction Act will end up causing more inflation down the road, fact! Go ahead and flame me libbies, get back to me in a few years!
  • Cprescott Fisker is another brand that Heir Yutz has killed.
  • Dwford Every country is allowed to have trade restrictions except the US.
  • 1995 SC Are there any mitigation systems that would have prevented this though? We had a ship hit a bridge in Jacksonville a few years back and it was basically dumb luck it didn't collapse. This looked like a direct hit.
  • Cprescott Oh, well.
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