Goethe's Turnpike Gate

Dear Reader,

“Anyone who sits at a turnpike gate and does not become rich is an idiot.” The author and playwright Johann Wolfgang von Goethe travelled extensively in Europe in the 19^th century and had to pay tolls or tariffs at every small turnpike gate so that he could continue his journey. But where was the money going? Who benefited from it? Or were there ultimately only losers?

Electric cars are currently being overproduced in China. As demand on the domestic market has stagnated, the Chinese are exporting their electric models in large cargo ships to the USA and Europe, where they are being sold below their market value. For this reason, the EU Commission initiated an anti-dumping investigation in September 2023. Chinese exports of BEVs to the USA rose by 70 % in 2023. As a result, on May 14, 2024, US president Joe Biden made it more difficult for Chinese manufacturers of electric cars to access the US market by introducing a massive increase in tariffs from 25 to 100 %. According to the Biden administration, Chinese manufacturers receive unfair subsidies at home and therefore could distort international competition with low-price vehicles.

Almost as a form of revenge, at the end of May the Chinese authorities began an anti-dumping analysis of imports of POM copolymers from the European Union and the USA. The thermoplastic is used in the manufacture of cars, smartphones and medical devices. The Chinese retaliatory tariffs that will potentially result from this analysis could have a negative impact on sales of premium cars, spirits and meat from Europe. This could be the start of an escalation spiral.

After the end of the investigation described before, the EU imposed temporary punitive tariffs on specific Chinese car manufacturers with effect from July 5 for a period of four months. Until then, the EU had only charged a 10 % import tariff. Now BYD is subject to an additional tariff of 17.4 %, Geely to 19.9 % and SAIC/MG to 37.6 %. All other car manufacturers must pay an extra 20.8 %. However, this measure is likely to backfire, because for example the “Bavarian” BMW iX3 is made by Brilliance in Shenyang, the “Romanian” Dacia Spring Electric in Wuhan by Dongfeng, the “American” Tesla Model 3 in Shanghai, the “British” Mini Cooper SE by Great Wall Motor in Zhangjiagang, the “German” Smart #1 by Geely in Xi'an and the “Swedish” Volvo EX30 by Geely in Zhangjiakou. All of these electric models are imported into Europe and will be subject to the punitive tariffs.

We can only hope that the German Federal Minister of Economic Affairs, Robert Habeck, was able to hold further discussions on trade barriers during his visit to China in the middle of June. This is an important consideration for free trade and we definitely do not want to return to the turnpike gates of Goethe's time.

Best wishes,

Dipl.-Ing. Michael Reichenbach

Deputy Editor in Chief