China responds to EU tariffs on electric cars

Last week, the EU announced a 38.1% tariff on electric vehicles (EVs) imported from China. This week, the Chinese ministry of commerce announced that it has initiated an anti-dumping investigation on imported pork and pork products originating from the European Union. While strictly speaking both these events are separate from each other, the reality is that the investigation is a Chinese response to the EU action, and the scenario has been flagged in Chinese media last month.

It also says that the investigation was triggered by a complaint by the domestic industry and that it would be adhering to WTO rules. The expectation is that the investigation will take a year to complete, though there is provision for it to be extended a further six months if required. During this period, EU port exports to China can continue under current trading arrangements.

China dominance on EV market

This latest trade spat is a result of the dominant position being built by Chinese EV manufacturers in the US and EU, which is a major threat to the traditional, established motor manufacturers. These business have been developed over more than a century and based on the internal combustion engine, powered by fossil fuels. With the EU and UK setting a deadline of 2035 for the end of cars powered by fossil fuels, these companies are being forced over a decade to transition from a manufacturing model developed more than 100 years. China on the other hand, didn’t have a traditional car industry as such, though it has acquired British and European brands in recent years. It is, however, a global leader in battery manufacture, the platform for powering EVs, and has been growing market share of EV sales in Europe and the US at a rapid rate. This is being achieved by having a product that is of comparable quality to what is available from established vehicle manufacturers, but at a much lower retail price. The belief in the EU and US administrations is that this lower price is achieved because of unlawful subsidies to the sector by the Chinese government.

Why is pigmeat targeted?

Whenever a trade spat arises between countries, it is typical that products are chosen that hit the constituencies of the politicians involved. For example, when China and the US were at loggerheads during the Trump presidency, agri food products were targeted, as they tend to originate in the heartland of his voters. Similarly, when the US introduced tariffs on dairy imports from the EU during the Boeing-Airbus dispute, it was believed that this was targeted at then trade commissioner Phil Hogan, who hailed from the heartland of Irish dairy production. Several prominent EU countries are major exporters of pigmeat to China, as Figure 1 illustrates.

Trade volumes

China is the biggest importer of pigmeat in the world, with the USDA forecasting that it will import 1.875m tonnes this year (carcase weight equivalent), similar to what it imported last year. On exports, the EU is the largest exporting block in the world, with the USDA forecasting that these will amount to 3.225m tonnes this year, more than double the 1.49m tonnes it forecast for Brazil to export and the 1.335m tonnes from Canada.

Within the EU, the major exporters in 2023 were Spain, at 378,101tonnes (product weight), Netherlands, at 120,449 tonnes, Denmark, at 114,225 tonnes, and France, at 66,123 tonnes. China is a significant market for Irish pigmeat exporters, taking 32,973 tonnes in 2023.

Irish concern

The issue was raised by the Irish Farmers Journal with the Minister for Agriculture Charlie McConalogue earlier this week. He said: “I am disappointed at the announcement by China to initiate an anti-dumping investigation into exports of pork products from the EU, including Irish exports. I believe that the European and Irish pork sector are fully compliant with WTO rules. The Government is engaging with EU Commission on this matter to ensure they defend the interests of Irish exporters and producers.”

China has always been a volatile market for Irish pig exports, peaking during the period when Chinese production was decimated by African Swine Fever in 2019, 2020 and 2021. Since then, it has been falling, but it still remains an important market.

So far, the threat is confined to EU pork exports to China, but other sectors of Irish and EU agriculture are also vulnerable if an investigation leads to tariffs. Beef exports from Ireland have been a stop-start process because of BSE incidents, and it remains a major market for Irish dairy exports, even if infant formula volumes and value have declined in the last couple of years.