Trade clash between China and Europe: EU cheeses in the crosshairs because of electric cars

The EU is the second largest supplier to Beijing, accounting for at least 36% of the total value of imports in 2023, behind New Zealand, according to Chinese customs data. According to Eurostat data, the EU exported EUR 1.7 billion worth of dairy products to China last year (up from EUR 2 billion in 2022), accounting for 9.5 per cent of the EU's total dairy exports.

Among the European countries, Ireland is by far the largest exporter to China, with around EUR 420 million last year.

The European Commission states that it intends to 'firmly defend the interests of the EU dairy industry'.

On 20 August, Brussels confirmed its intention to impose a tariff battery of up to 37% on imports of electric vehicles made in China, in addition to the already existing 10% tariff on all vehicles imported into Europe. The move had been announced in June, in the wake of the US decision in May to set a 100% levy. Under indictment were the generous subsidies given by the Beijing regime to auto groups for the production of electric cars, which gave the Chinese industry a huge competitive advantage in a key sector for the green transition.

The Chinese government immediately threatened to take all necessary measures to protect its companies. With regard to Europe, an anti-dumping investigation on pork had already been launched in June. The EU accounts for more than half of the approximately USD 6 billion of Chinese imports (in 2023), about a quarter of which comes from Spain alone. In second and third position are the Netherlands and Denmark (with USD 620 million and USD 550 million of exports respectively). There is also an investigation into French cognac: a retaliation against Paris, which has pushed hard for EU duties.

"The combined value of the EU's pork and dairy exports to China is less than the value of China's electric car battery exports to the EU, which was around $13.5 billion in 2023," said Chim Lee, senior analyst for China at the Economist Intelligence Unit. "Domestic economic pressures, together with the increasingly important role played by external demand in supporting growth, will suggest caution against an overly confrontational response," Lee added.

The EU Chamber of Commerce in China said that the measures taken by Beijing 'cannot be considered a surprise'. The launch of trade barriers by a government generates 'a similar response' from those affected, a note explained.

On 9 August, Beijing took the clash to the WTO field by reporting European duties on electric cars to the trade dispute tribunal. However, the road is uncertain: Brussels is convinced that it has acted within the rules. And a long one: it could take years to reach a verdict and at that point the effects, on market positions and production patterns, might not be reversible.

Brussels also started investigations into manufacturers of wind turbines and solar panels (the latter have been the focus of disputes for years) and adopted provisional anti-dumping duties against Chinese biofuel imports.