If a surge in government support for strategic industries risks fueling a global subsidy war, then the European Union may have just sparked one of its biggest battles.
With European officials fearing millions of auto jobs are at risk from China’s surging electric vehicle exports, the bloc’s executive arm on Wednesday launched an investigation into Beijing’s financial support for the EV industry.The probe, which could take up to nine months, will probably lead to new EU tariffs on Chinese EV imports and embroil major non-European automakers like Tesla Inc., which produce cars in China for export to the bloc.
There’s also the question of Beijing’s response. While officials in Brussels say they want to “de-risk” from Beijing without a full-blown economic decoupling, China is a major supplier of raw materials and components for EU industries and a crucial market for German cars. European firms could also be vulnerable to sudden changes in regulations that curb their access to China’s massive consumer market.
But because Washington and Brussels are now seeking some collaboration on their approaches to China, an EU probe and any resulting trade protections are likely to further draw in the US. Chinese manufacturers “deliver high-end or cost-effective EVs that cater to diverse consumer preferences, receiving acclaim worldwide, including in Europe. It’s crucial to emphasize that this advantage isn’t a product of what the commission side called ‘huge state subsidies,’” the organization said on its website.
The EU probe will gather information and evidence to determine whether China has breached the bloc’s anti-subsidies rules by supporting Chinese battery-powered EVs.
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