China threatened on Monday to impose tariffs on European pork imports, appearing to be in response to the European Union’s decision last week to export electric vehicles to China.Imposition of preliminary tariffsrevenge.
China’s Ministry of Commerce announced it has begun investigating whether pork from European Union countries is being dumped into China at unfairly low prices, a case that could lead to tariffs on dozens of products ranging from pork chops to pickled pork intestines.
The ministry said the move was made in response to a request from the China Animal Husbandry Association, a government agency, and released a copy of its application. The association accused the European pork industry of benefiting from inappropriate government subsidies due to overcapacity – a charge that European and American officials have levelled at China’s auto industry.
European Commission spokesman Olof Gill said in a statement that the EU’s executive arm was analysing China’s actions and would “closely monitor developments and take appropriate interventions, in coordination with EU industry and member states, to ensure the investigation is fully in line with the relevant” World Trade Organization rules.
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The European Union Chamber of Commerce in China, a business group, said in a statement that China’s action was not surprising after the European Union’s recent tariffs on electric vehicles. It also said it “encourages both sides to take actions to depoliticize the business environment and find ways to address the underlying causes.”
Imposing tariffs on electric vehicles has been a divisive issue in Europe. Unions and European auto parts makers worry that China’s rapidly growing exports of electric vehicles to Europe will lead to job losses. But European automakers such as Volkswagen have been expanding electric vehicle production in China and shifting sourcing from Europe to low-cost Chinese suppliers. They have been worried that trade frictions could prompt China to take action against luxury car imports from Europe.
In choosing imported pork as an apparent retaliation for tariffs on electric vehicles, China is harking back to a play it made in its last major trade dispute with the European Union more than a decade ago.
In 2013, the European Union imposed an 11.8% tariff on solar panels from China. In response, China threatened to impose tariffs on wine from Europe.Imposition of tariffsand then successfully persuaded European governments to force EU leaders in Brussels to make concessions.
Farmers are a powerful political lobby in Europe and have been looking for ways to increase sales to China. Chinese trade policy experts say Beijing may be hoping to pressure the EU to make concessions again.
In addition to the pork trade case, the Ministry of Commerce has launched an investigation into imports of cognac and other European wines and spirits, mainly from France, in January this year. France was one of the first countries to support the tax on Chinese electric vehicles, citing allegations that China has heavily subsidized the electric vehicle industry.
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It is unclear whether China can successfully block the EU from imposing tariffs on electric vehicles. After the EU lifted its tariffs, China’s imports of solar panels devastated Europe’s solar panel manufacturing industry. European governments are still looking for ways to revive the industry. Europeans don’t want the electric vehicle industry to suffer a similar fate.
China also has a large overall trade surplus with Europe. In recent months, for every container of imports from Europe, China has sent four containers of exports to Europe.
In China’s case, tariffs on pork help protect a vital industry from international competition. Pork prices fell 14% last year as Chinese farmers expanded their herds. Pork prices began to recover last month, but are still about half the level they were three to five years ago, when a spree of tariffs on pork caused prices to rise.African swine fever outbreakThis has led to a significant reduction in China’s pig inventory.
China is by far the world’s largest market for pork, the staple meat of choice. In some provinces, such as Hunan, the average person consumes nearly a quarter pound of pork a day.
China has yet to retaliate against the Biden administration’s decision in early May to raise tariffs on Chinese electric vehicles, lithium batteries and other products. China has criticized the U.S. tariffs but has not been quick to escalate with retaliatory tariffs, as it did under the Trump administration, which backfired on China in 2018 and 2019. The Trump administration quickly expanded the scope of tariffs, many of which remain in place today.
Beijing has been trying for years to reduce its reliance on imports, and Beijing imports fewer goods from the United States. As a result, China’s options for broad retaliation are limited.