China Ink

Is trade war now inevitable?

Talk of a trade war grows as the row over EU tariffs on Chinese solar products rolls on


Trade war pending?

Western media focused on comments made by China’s deputy commerce minister Zhong Shan that there would be retaliation if the EU proceeded with plans to levy tariffs on imports of Chinese solar products. The Financial Times quoted Zhong as warning: “The Chinese government would not sit on the sidelines, but would take necessary steps to defend its national interest. Despite the heightened risk of the China-EU trade disputes widening and escalating, the Chinese government would nevertheless make a best effort in the hope of reaching a consensus and avoiding a trade war, but this would require restraint.”

News then emerged that 17 of the EU’s nation states – including Germany and Britain – were opposed to the tariffs and planned to vote against them.

As Der Spiegel pointed out: “The escalating trade war can only have one loser: Germany”. It noted too that the mood in China was increasingly bitter: “In Chinese industry, the officials of the European Commission have a reputation similar to that enjoyed by tax investigators among affluent tax evaders. They are hated.”

The Chinese press was pessimistic that a negotiated settlement will be possible in the next two months. A Chinese source close to the EU talks said of De Gucht’s new measure: “If we have a loaded gun to our heads, it is not a fair negotiation but at least it creates room for both sides to find a solution.”

But as Shanghai Daily comments, the Chinese are putting on some pressure too. The newspaper reported Thursday that if tariffs are eventually imposed at the 47% level, China will retaliate with tariffs against imports of European wine. This looks likely to hit France particularly hard.

A stay of execution?

Reuters reported on Wednesday of a potential climbdown saying that the “EU trade chief wants to avoid a trade war with China”. The commissioner in question, Karel De Gucht, backed down from imposing the full 47% tariff due to come into effect on June 6. Instead he delayed the decision till August 6 and imposed a temporary lower tariff of 11.8%. “This is a one-time offer to the Chinese side, providing a very clear incentive to negotiate,” De Gucht told a press conference. “It provides a clear window of opportunity for negotiations, but the ball is now in China’s court.”

In an article headlined “China-Europe trade war is difficult to avoid”, the International Finance News thought confrontation was close. About 70% of Chinese photovoltaic products are exported to Europe and the Beijing Youth Daily said that the Chinese government is taking a “tougher stance” than it did against US solar tariffs last year because the amount at stake is much greater. The newspaper also warned that the tariffs would do great harm to Europe. Other sections of the Chinese media gave a lot of coverage to a mock funeral held in Brussels by the Alliance for Affordable Solar Energy, which claims to represent 530 European companies, capturing €20.9 billion in sales and employing 60,000 people. It organised the event to “mourn the 200,000 jobs to be lost” if tariffs are imposed.

Meanwhile Southern Weekend thought Beijing had “facilitated the European Commission’s arrogance” by not ordering countermeasures earlier. But it seems that Beijing’s recent push to divide the European nation states is starting to bear fruit. Beijing Youth Daily noted that the European Commission is caught in “an embarrassing situation” with a majority of countries opposing the tariffs, including the EU’s “locomotive” Germany.

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