By on June 7, 2013
S-Class China

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 China amounted to roughly $24 billion.

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13 Comments on “Trade War Watch 23: EU, Deaf To Obama’s Tire Defeat, About To Lose Car Exports In Trade War With China...”

  • avatar

    I guess no one believes in free-trade at all.

    Why are we still embargoing Cuba?

    • 0 avatar

      …”Why are we still embargoing Cuba?”…


      Actually no idea. The Castro’s are a bunch of narcissistic murderous kleptomaniacs, but that doesn’t stop us from trading with China, Venezuela, or Putin-Land.

  • avatar

    I wonder how they’ll write the special exception for Audi into this one.

  • avatar

    Let the free market decide about Chinese tires. You’d be amazed at what people are willing to put on their vehicles that may, or may not actually constitute being a tire.

    The Chineseification of everything in the US has made the cheapest thing available priority one in purchasing a set of tires. Quality and name brand recognition comes in second or third at best.

    The only caveat to this would be that consumers would have to sign a waiver, knowing darn well that they are purchasing a tire of questionable quality and safety.

    • 0 avatar

      The previous owner put chinese tires on steers of my pickup. They were nearly brand new when i got the truck. Now after only 17,000 miles one is at the wear bars and the other is way out of balance.

      I’m going to be replacing them with some nice michelin highway tread tries with 60,000 miles tread wear.

      • 0 avatar

        There’s just something about spankin’ new Michelins on an old work truck that says exactly what I want to say about myself. They’re what I bought with complete satisfaction.

  • avatar

    Free trade among markets (nations) will be always the best for the consumers and the producers themselves.

    Except when you want to monopolize a certain market, then you go to your government, bribe it so they impose “protection” tariffs on whatever, of course with all the “good” intentions to protect their citizens…… Horsecrap

    • 0 avatar

      Slight flaw with your argument, it isn’t actually true. In a simple text book world, free trade works perfectly. In the real world it does not, because the models that economists use rely on absurd asumptions, like perfect information and rational economic actors. In the real world markets fail.

      So if we had free trade, it wouldn’t work, but in reality we don’t have free trade. True free trade includes free movement of labour, no more big fence across the Mexican boarder.

      The Chinese know this, and pay lip service to free trade, but rig things in their favour. Rigged currency, cornering the market in resources like rare earths, restricting ownership of their companies, and violating intellectual property of other nations.

      We let them get away with this, weakening our economies, and making ourselves more dependent on China. Look at America’s trade deficit, the deficit of my country Britain. The figures are awful and will not get any better until we abandon our deluded faith in free trade.

      • 0 avatar

        Not that I’m a big fan of China, but those rare earth metals happen to located inside of China’s borders so I really can’t blame them for maximizing their value. The same has been done by other countries for other commodities for centuries.

        As to foreign ownership restrictions, it’s in the US as well. Take a look at the regulations for foreign ownership of telecoms, radio and TV stations, commercial airlines, for example.

        • 0 avatar

          There is also another detail, and that is being willing to exploit your resources. The USA has all the rare-earths it wants, but is not willing to actually mine and refine to get them – too nasty for the eco-pukes. So they effectively ban it (endless court wars, permitting, EPA glonks, etc.), pat themselves on the back for banning it, and buy the resources elsewhere like hypocrites. Then complain about Chinese ‘monopolies’ on things.

          A great deal of polluting industry that has been banned in the West has really been exported to China – see no evil hear no evil.

          Western consumers want the goodies, but are not willing to do the hard work to get the resources then fashion said resources into said goodies. Then the West collectively complains about it.

          The West gets what it deserves.

  • avatar

    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.

  • avatar

    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?

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