China is intensifying its threats against the European Union by planning additional trade barriers, specifically targeting the European aviation and agriculture sectors. This announcement follows the recent introduction of new restrictions on the export of Chinese aviation equipment and related technologies. These measures are part of a broader strategy by China to exert pressure on the EU in response to ongoing trade tensions. The aviation sector is particularly vulnerable because it relies heavily on Chinese materials and tools, such as titanium and aluminum alloys, industrial plastics, and other specialized equipment.
According to a letter from the Chinese Ministry of Commerce addressed to EU Trade Commissioner Valdis Dombrovskis, China is ready to engage in a trade war with the EU. This development comes on top of the existing tariff and technology conflict that China has with the United States. The letter indicates a significant escalation in trade hostilities, highlighting China's willingness to take aggressive steps to protect its economic interests. This readiness for a trade war signals China's determination to counteract any measures that it perceives as unfair trade practices by the EU.
The Chinese Ministry of Commerce, in its letter, called for a "reset" in relations with the EU, but presented this appeal alongside a list of threats aimed at European exporters. The concept of a "reset" involves the EU lifting restrictions on Chinese exports and opening its market more widely to Chinese goods. However, the inclusion of threats in the letter suggests that China's appeal is not just a request for better relations but a demand backed by the potential for punitive actions. This dual approach reflects China's strategy of using both diplomatic and coercive tactics to achieve its trade objectives.
To prevent further "escalation," Beijing has specifically demanded that the EU close ongoing investigations into Chinese dumping practices. These investigations cover a range of products, including electric vehicles, steel pipes, electronic equipment such as surveillance cameras, and certain food products like vanilla and garlic. China's demand to halt these investigations underscores its sensitivity to scrutiny over its trade practices, which are often criticized for being unfair and damaging to foreign competitors. By insisting on the cessation of these probes, China aims to shield its exporters from potential penalties and maintain its competitive edge in the European market.
The central issue at hand is the surprisingly low prices of Chinese goods, which are attributed to a deliberate policy by Beijing. Chinese exporters are suspected of benefiting from extensive government subsidies, allowing them to maintain prices that are significantly lower than those of their competitors. The EU launched an investigation into these practices last autumn, aiming to uncover the extent of state support and its impact on market competition. The findings of this investigation, expected to be published soon, could lead to the imposition of anti-dumping tariffs. These potential tariffs are causing significant concern for Chinese authorities, who fear that such measures could severely impact their exports to Europe.
In response to the EU's actions, China has threatened retaliatory measures against European food exports, which play a crucial role in the agricultural sector, accounting for 6.4% of its turnover. This threat highlights the interconnected nature of global trade, where actions in one sector can have wide-reaching implications for another.
China has also opened its own investigation into European, particularly French, dumping practices regarding cognac. This product, alongside other European alcohols, has seen growing popularity in China, making it a strategic target for retaliation. By scrutinizing European practices, China aims to apply pressure on the EU and create leverage in trade negotiations.
Earlier this week, the Chinese government announced new restrictions on the export of aviation equipment. Although the balance of trade in aviation typically favors Western countries purchasing Chinese materials, the sector relies heavily on components such as titanium and aluminum alloys, industrial plastics, and specialized tools from China. These restrictions are a strategic move by China to leverage its position in the global supply chain and exert pressure on the EU. By limiting the availability of these crucial materials, China aims to disrupt the European aviation industry and compel the EU to reconsider its trade policies.
In recent years, European countries have been attempting to address the significant trade deficit they have with China, which stands at nearly 300 billion euros. This deficit reflects the imbalance in trade relations, with Europe importing far more from China than it exports. European initiatives to reduce this deficit include measures to promote local industries and reduce dependency on Chinese imports.
However, these efforts have been met with strong resistance from Beijing, which views any attempt to curb its export dominance as a threat to its economic interests. China's aggressive response underscores its determination to maintain its advantageous position in global trade, even if it means escalating tensions with major trading partners like the EU.
03.06.2024
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