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German carmakers ‘afraid’ of China retaliation, economy minister warns

German carmakers ‘afraid’ of China retaliation, economy minister warns

by host

BERLIN — German carmakers are “afraid” that they could be hit by retaliation if the EU were to impose duties on Chinese electric vehicles as a result of a new anti-subsidy probe, German Economy Minister Robert Habeck warned.

In strikingly frank comments during a panel discussion in Berlin on Friday, Habeck also admitted that there is a Franco-German divide over the anti-subsidy investigation, which was announced by European Commission President Ursula von der Leyen earlier this month and has sparked fears of a trade war with Beijing.

Habeck said that France, which had pushed strongly for such an EU probe into Chinese e-vehicles, was selling far fewer cars in China than German automakers and had therefore less to lose in a potential tit-for-tat escalation with Beijing over car tariffs.

“German cars are sold well in China,” the German economy minister said at the Atlantic Council’s Transatlantic Forum on GeoEconomics. “Now Ursula von der Leyen proposed that we should have a deep dive into the question if China is giving illegal, or not WTO-[compatible] subsidies” to its producers of electric cars, he said.

Habeck added: “The German automotive industry is afraid, rightly so,” that if the Commission were to find evidence for such illegal state aid and then impose anti-subsidy duties on Chinese electric vehicles, then “we would have to fear counter-action.”

He argued that “for France it’s not a problem because they’re not selling so many cars” on the Chinese market, which is why Berlin and Paris are “coming from different angles” when judging the impact and consequences of an EU anti-subsidy probe.

“It’s very, very hard to bring all these different views together,” Habeck said.

German industry officials, speaking under the condition of anonymity, had previously highlighted the diverging interests between Berlin and Paris on the subsidy probe and even claimed that French carmakers were seeing as a chance to harm their German competitors. Yet Habeck’s remarks are the first time that a senior German official has openly admitted such a divide.

German Chancellor Olaf Scholz’s top adviser on EU, economic and financial policies, Jörg Kukies, told the same Atlantic Council event earlier on Friday that the EU’s anti-subsidy investigation against Chinese cars was “perfectly normal” and “totally legitimate.” Yet Kukies stressed that such a probe must respect “very high standards.”

“So you can’t just say they [the Chinese] are doing this and that and therefore we impose trade-related measures,” Kukies said, adding that “the threshold of proof and evidence is very high.”

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