Trade War Watch 23: EU, Deaf To Obama's Tire Defeat, About To Lose Car Exports In Trade War With 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 C hina amounted to roughly $24 billion.