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The EU and China have recently hit the bar on electric vehicles!
The European Union blamed the low price of electric vehicles in China because of government subsidies and decided to raise taxes to protect its own car companies.
The decision divided the EU, with some countries supporting and others opposing.
And China's response was quite swift, only a few days to strike at France's brandy, imposing countermeasures.
Seeing this trade dispute escalate, everyone is wondering: will the two sides continue to increase each other's weight, or will there be a chance to sit down and negotiate a settlement?
Divisions and controversies within the EU
Some time ago, the European Commission believed that Chinese electric vehicle companies gained an unfair competitive advantage through government subsidies, which in turn hit the domestic European auto industry.
In response to this problem, the EU decided to take protectionist measures, proposing to impose additional tariffs on electric vehicles imported from China.
The proposal sparked extensive discussion and was finally approved by EU member states on October 4.
But the controversy behind it is huge.
The decision has sharpened the positions of the EU's 27 member states, revealing that countries are deeply divided on how to handle economic relations with China.
Let's start with France and Italy, two countries that are staunch supporters of tax increases.
The France government is determined to protect its own car industry, especially brands like Peugeot and Citroen.
President Emmanuel Macron has long made it clear that the auto industry is very important to the France economy, and the tariffs can help local automakers gain some buffer time in the face of strong competition from China.
France hopes to regain competitiveness for domestic companies through this means, and even plans to force Chinese companies to set up factories in Europe.
Italy has a similar attitude, after all, its Fiat also faces a strong challenge from Chinese car companies.
They feel that the tax hike can block the entry of Chinese electric vehicles and give their own car companies a breather.
But Germany doesn't think so.
Germany's automotive industry is too deeply linked to China, and large companies such as Volkswagen and Mercedes-Benz have a very large share of the Chinese market.
If a trade war breaks out between China and Europe, Germany's losses will definitely not be small.
Germany Chancellor Olaf Scholz repeatedly called for caution before the vote.
These large companies in Germany have long publicly stated that it is completely undesirable for the EU to engage in this tariff policy, and that they will only hurt themselves in the end.
In addition to this, there are some countries that have opted for a neutral or wait-and-see attitude.
In this vote, 12 EU member states chose to abstain.
These countries have a complex position, and they are reluctant to explicitly support tax hikes to avoid a bad relationship with China, nor do they want to openly oppose the EU's collective decision-making.
Spain is a prime example.
Although he previously voted for the tax increase, in practice, Spain Prime Minister Pedro Sanchez expressed opposition.
Because he fears that China's retaliatory measures will hit Spain's pork exports and affect the domestic economy.
Most of these abstaining countries are considering their own economic interests, and they believe that the EU's head-to-head with China is not a long-term solution.
It can be said that the divisions within the EU reflect the different economic interests of the member states and the complexity of the relationship with China.
Countries that support tax increases are more concerned about protecting their own industries, while those that oppose them are more concerned about economic ties with China and their long-term implications.
Despite the passage of the proposed tax hike, the results of the vote showed that the EU did not have a unified consensus on how to deal with China.
China's swift countermeasures
Just a few days after the EU decided to raise taxes on Chinese electric vehicles, China's counterattack came, and the target was very clear - France.
On October 8, China's Ministry of Commerce announced that it would impose additional anti-dumping duties on brandy from the European Union.
This caught France off guard, especially the wine merchants in France, who were simply angry.
Because China is the second largest export market for France's brandy, especially France's cognac, which is the "pride" of France.
As a result, the sales of brandy in France have suffered.
So why did China choose Bailan to start the game?
It's actually a bit of a "tooth for a tooth".
After all, France is one of the most supportive countries in the European Union for tax increases, and its attitude is particularly positive.
Therefore, China's counterattack this time went straight to one of the economic lifelines of France - the wine industry, which can be regarded as a precise strike.
Cognac producers and wine farmers in France were already having a hard time, and now with this hammer, life is certainly even harder.
In fact, the wine industry in France has been facing overcapacity and sluggish sales in recent years.
As soon as China imposes anti-dumping duties, France's wine merchants are even worse.
This series of problems led them to openly express their dissatisfaction and even organize protests demanding that the government find a solution to the problem.
These wine merchants know very well that if Sino-French relations continue to deteriorate because of the auto tariff issue.
Then their business may be hit in the long run, after all, the market is lost, and it is not said that it can be picked up.
If you have to fight with China, it is your own family that suffers in the end.
Faced with pressure from domestic wine merchants, the France government is obviously a little embarrassed.
After all, on the one hand, they support the tax hike on Chinese cars and want to protect their own car companies;
On the other hand, local wine merchants are seeing their interests hurt by China's countermeasures.
Macron is really in a dilemma right now.
To make matters worse, this is just the beginning.
China's countermeasures are likely to expand to other areas.
Moreover, other European countries, especially the opposition, like Germany, are secretly watching developments.
Countries such as Germany have long expressed concern about tax hikes, fearing that China's counterattack will affect them.
Now France has become the first "victim", which has made Germany and other countries more firm in their position and continue to promote the line of solving problems through dialogue.
Germany Chancellor Olaf Scholz and other leaders opposed to tax hikes have repeatedly stressed that the global economy is highly interconnected and that a trade war at every turn will only hurt everyone.
epilogue
With China quickly fighting back, it is clear that the EU's tariff war on electric vehicles has exceeded expectations.
France actively promoted the issue of tax increases, but did not expect to become the first country to withstand countermeasures.
While the EU appears to have passed the proposed tax hike, the ripple effects may have only just begun.
Resources:
After the Chinese side made a move, the Minister of Economy of Spain shouted to the EU: Do everything you can to talk to China-Observer.com