EU Vassals Declare Self-Harming Trade War On China

Just after being significantly rejected by the voters in the European Parliamentary elections, the EU vassal ruling class has decided on a new self-harming trade war with China. Having cut themselves off from Russian cheap fossil fuels and the Russian market, they are now moving to cut themselves off from the largest, and still fast growing, national market in the world. Already dependent upon US fossil fuels and increasingly the US Military Industrial Complex (as they increase defence spending), they are now hastening the deindustrialization that will render Europe as an irrelevant power; becoming more and more under the thumb of the US. Truly a declining archipelago at the western end of a rapidly growing and developing EurAsia.

The European Union has confirmed that it will levy additional import tariffs of 21% on European and US (e.g. Tesla) firms manufacturing electric vehicles (EVs) in China for export to the EU. For the Chinese manufacturers, the tariffs will be 17.4% on BYD, 20% on Geely (which owns the rapidly growing Volvo brand, and does have plants in Sweden), and 38.1% on SAIC (which owns the rapidly growing MG brand). The impact on the very successful new Volvo EX30 EV, made in China, may be significant unless Geely “eats” a significant portion of the new tariff. For the other Chinese manufacturer’s, those that “cooperated” with the EU will be charged an additional tariff of 21%, those that did not “cooperate” 38.1%. All of these extra tariffs are on top of the already in place 10% tariff; for example, SAIC will pay a total of 48.1% in tariffs. Perhaps this is why many Chinese manufacturers kept European prices high, giving them pricing room to “eat” the increased tariffs? In 2023, Chinese made BEVs had about a 19% share of the European BEV market, with 4.9% SAIC-MG, 1.3% Polestar, 5.5% Tesla, 3.9% Renault-Dacia, and 1.2% BMW. The tariffs will come into effect on July 4th, and in the interim there will be further discussions with the EV manufacturers.

This is very bad news for the Tesla Shanghai plant, that is already struggling with lower Chinese sales and now will have to deal with an additional 21% tariff on cars exported to the EU. All Model 3’s and some Model Y’s sold in Europe are made in Shanghai, and this is on top of the French (where Model 3’s have historically sold well) government’s move to remove EV subsidies from cars made outside the EU while keeping such subsidies for those made in the EU.

This will at best provide only a short term reprieve for the likes of VW, Mercedes, and Stellantis’ car plants in the Germany, France and Italy as Chinese manufacturers set up plants in peripheral Europe; as already announced by BYD (Hungary) and Chery (Spain). In addition, the Chinese manufacturers may very well step up their campaign to destroy European brand market share in China; where the German brands have recently earned around 40% of their global profits but are currently in severe trouble. As with the tariffs on the Chinese manufacturers, the tariffs on the other manufacturers will not produce a flow of manufacturing back to Germany, France and Italy. Instead, new plants will be opened in the much cheaper EU peripheral nations such as Slovakia (has plants from VW, Peugeot-Citreon, Kia and Land-Rover), Hungary (planned BYD plant), Romania (where the Dacia HQ and plants are), Bulgaria (Great Wall Motors plant), and Spain (planned Chery plant). With both Chinese and EU manufacturers moving to these nations, the EV supply chain will rapidly leave France, Germany and Italy. At the same time, the EU EV transition will be set back due to a lack of affordable Chinese-made EVs. Both Chinese and EU brands that produce cars in China for export may also focus more on non-EU European markets, such as the UK (third biggest car market in Europe), Norway, Switzerland, Serbia and Turkey; which may all soon see a surfeit of affordable EVs.

The Chinese state can retaliate in a number of subtle ways, some more subtle than the others. It can firstly highlight the protectionist and “unfair” nature of these tariffs to the Chinese citizenry and couch them as an attempt to keep China down. This may produce a very negative reaction by Chinese consumers to all European brands, not just car brands, negatively affecting European firms across the whole spectrum of products and services. With German manufacturing exports, and French wine, cheese and luxury goods (and Italian luxury goods) being over-represented in China with respect to other EU nations, such a negative consumer response could have a very focused impact. The Chinese state can also maintain a stable Euro/Yuan exchange rate, even with a significant inflation differential between the EU (higher) and China; which will erode the extra tariffs over time.

The Chinese state could also “advise” the Chinese manufacturers to only establish plants in peripheral EU nations, so as to impact German and French manufacturing the most; as it knows that these two nations are the most vulnerable to such moves. This may very well also be the plan of those manufacturers as they do not want to establish EV value chains in nations that would directly benefit the home base of their main competitors and the politicians responsible for the tariffs (e.g. von der Leyen). Such a policy would also aid in the splitting of EU nations between anti-China US vassals and more independent nations. In addition, the Chinese car manufacturers may accelerate their entry into non-EU and non-US markets with a focus on nations where French and German (and Italian) manufacturers are currently successful; for example Mexico, Brazil and Turkey as well as of course China.

The least subtle way would be to levy tariffs very specifically on German and French imports to China, in the areas that would cause the most harm. Germany was actually the largest exporter of manufacturing goods to China in 2023. The largest share of EU exports to China is taken by machinery and vehicles, with German exports being heavily over-represented. The French wine industry would also be a useful target, in the same way that China put tariffs of over 200% on Australian wine (recently removed after three years), as well as the cheese and luxury goods industries. The resultant “pain” would then be very focused, perhaps in the run up to the French elections on June 30th and the German elections that may very well be held this year.

The overall impact would be to remove French and German (and Italian) manufacturers from all markets outside the EU and the US, which are both relatively stagnant markets, while Chinese plants in such nations as Hungary and Spain slowly reduce EU brand market share in the EU itself and produce divisions within the EU. In addition, very specific industries in France and Germany (and possibly Italy) will be negatively affected, producing increased deindustrialization and divisions within those two nations. That would be in addition to the high energy costs impact on EU industries in general, especially the significant German petrochemicals sector.

China is not like the occupied vassal Japan, and cannot be treated the way that Japan was treated in the 1980s and 1990s when its manufacturing achieved global dominance. China is the largest economy in the world, with the largest domestic market and manufacturing sector, and its ruling Party class is highly competent with a long planning horizon and the utmost patience. The Chinese government has already issued a strongly worded response, so we can assume that all of the above avenues of retaliation will be utilized. The Federation of German industries incredibly put out a statement fully backing the EU tariffs; placing a target fully on the back of German industry. The EU has also ignored the accepted World Trade Organization processes for such complaints, laying it open to retaliatory actions. The EU has picked another war that it cannot win, with the result that its demise will be accelerated. It also goes without saying that removing the possibility of cheaper, more affordable, EVs from the market will do nothing for furthering the EU’s clean energy plans. But it seems that the Boss Man’s (US capitalist elite) interests are so much more important than those of the European population; the expected orientation of mere vassals.