The U.S. is forging ahead with punitive tariffs against China. But Europe should not go down this road as well. If it were to do so, consumers would also be big losers.
U.S. President Joe Biden is imposing substantial punitive tariffs on numerous products from China in order to protect the U.S. economy from cheap Chinese products. The question of whether he is doing this for electoral reasons or to shield American manufacturers from unwelcome competition is of secondary importance. He is playing with fire and lighting the fuse for a trade war between China and the Western world. In our globalized world, such a course of action will ultimately only result in losers.
The European Union is also currently assessing the extent to which China is distorting the electric car market. The Americans’ decision could encourage some politicians to call for similar measures in the EU. However, the utmost caution and restraint is called for here. The German car industry, a key pillar of the nation’s economy, would stand to be the biggest loser, which would significantly impact that very economy.
The Detrimental Effect of Punitive Tariffs on Consumers
China would likely never accept punitive tariffs without putting up any resistance, but rather put in place similar barriers. This would be a disaster for German manufacturers. That is because they now sell around 30-40 % of their vehicles in China and have electric cars built there that are bound for the European market.
But customs barriers would also penalize consumers in Europe. China produces small electric cars at significantly lower prices than European manufacturers. Inexpensive electric cars could therefore significantly drive growth in the European electric mobility market. After all, affordable electric cars for those on tighter budgets are exactly what is currently lacking in the ranges of car manufacturers. And these have strong potential to bring about the politically desired e-mobility boom.
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