China warns of possible 'trade war' with EU as Germany's Habeck heads to Beijing

[June 21, 2024]  BEIJING (Reuters) -Beijing warned on Friday that escalating frictions with the European Union over electric vehicle imports could trigger a trade war, as Germany's economy minister arrived in the Chinese capital with the proposed tariffs high on his agenda.

Robert Habeck's three-day trip to China is the first by a senior European official since Brussels proposed hefty duties on imports of Chinese-made electric vehicles to combat excessive subsidies. That has unleashed countermeasures by China and harsh criticism from Chinese leaders.

This week alone, Chinese automakers urged Beijing to hike tariffs on imported European gasoline-powered cars and the government launched a dumping probe into EU pork imports in retaliation for the EU Commission's move.

"Responsibility lies entirely with the EU side," a spokesperson for China's commerce ministry said in a statement.

"In its countervailing duties investigation, the European side intimidated and coerced Chinese enterprises, threatened to apply punitive high tariff rates, and demanded overly broad information," it added.

Habeck's visit is seen as an opportunity for Germany, Europe's biggest economy, to explain to Chinese officials the recent tariff announcement while allaying the risk of retaliation from China that could harm German businesses.

Germany's voice carries particular weight, and its leading car manufacturers have vociferously opposed the EU tariffs. Berlin has urged dialogue while also expecting China to compromise.

The country's carmakers would be the most exposed to any countermoves from China, as almost a third of their sales came from the $18.6 trillion economy last year.

The EU's move on EV tariffs plunged trade ties with the world's second-largest economy to a new low.

But Chinese state media portrayed his visit as a chance to defuse tensions. Germany should seek consensus, some experts said, according to Chinese state-controlled tabloid Global Times on Friday.

Flags of European Union and China are pictured during the China-EU summit at the Great Hall of the People in Beijing, China, July 12, 2016. REUTERS/Jason Lee/File Photo

NEW LOW

On his arrival in Beijing, Habeck was expected to meet ambassadors of several EU countries and then head into talks with Premier Li Qiang and other officials.

He will also meet Industry Minister Jin Zhuanglong and Commerce Minister Wang Wentao before going to Shanghai and Hangzhou.

Earlier on Friday, he tempered expectations for what could be resolved during his visit. He said he does not expect to reach a solution on trade tensions.

Germany is also seeking to broaden access for its companies to the vast Chinese market, while also trying to "de-risk" its economy from being too reliant on any one country.

Trade experts say economic and political factors all increasingly favor the U.S.-German relationship.

Germany's 60 billion euros ($64 billion) of trade with China in the first quarter of 2024 was less than the 63-billion-euro total volume of U.S.-German trade. That snapped a trend that has ranked China as Germany's top trading partner for eight years in a row.

Official figures released on Friday underlined the shift: German exports to China fell 14% in May from a year ago while exports to the United States rose 4.1%.

(Reporting by Maria Martinez, Joe Cash, Ella Cao, Ethan Wang, Ryan Woo and Bernard Orr; Writing by Josephine Mason; Editing by Alex Richardson)

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