German deputy leader visits China as EU tax stand-off escalates By Reuters

Hosted by Maria Martinez

BERLIN (Reuters) – German Economy Minister Robert Habeck will travel to China this week in a bid to bolster economic ties while helping to fend off the EU’s threat to impose tariffs on Chinese cars, sparking fears of a trade war.

Habeck, who has himself spoken out against punitive tariffs as a last resort, is traveling with a key business delegation and is expected to talk about trade relations while pressing China on hot-button issues such as Taiwan and Russia.

Germany wants to expand its companies’ access to China’s huge market, while trying to “defuse” its economy from being too dependent on any one country.

Habeck’s trip comes a week after the European Commission raised tariffs of up to 38.1% on electric vehicle imports from China, marking a new low point in economic relations and prompting China to threaten retaliation against EU pork exports.

As Europe’s largest economy, Germany’s voice carries some weight and leading car manufacturers openly oppose EU tariffs. It called for dialogue while waiting for China to loosen up.

“Habeck should be the mediator between the EU and China here and resolve the trade dispute early for the benefit of German small and medium-sized enterprises,” said Patrick Schoenowski, of the German Association for SMEs, DMB.

“The goal of negotiations with China should be to resolve the causes of the punitive tariffs.”

Habeck’s ministry stated the goals of the trip as explaining Germany’s trade and economic policy in China, including its demand for energy exchange. But the car tariff issue is unavoidable.

“Definitely, the MEC will have no other choice but to address this issue, that is obvious,” said the ministry’s spokesperson.

“But he is not negotiating on behalf of the EU Commission, that is the job of the Commission.”

SHOWING EXCESSIVE AMOUNTS

The European Commission has said it will impose additional duties on Chinese electric vehicles from July to combat excessive subsidies.

The state-backed China Daily newspaper expressed hope that “reasonable solutions” could be found when Habeck held talks with Chinese officials before the tariffs went into effect.

German Chancellor Olaf Scholz, who visited China in April, did not criticize the EU tariffs directly but warned of protectionist risks.

Juergen Matthes, from the German economic center IW, said the tax reform will be important.

“If the EU has enough evidence of unfair subsidies, adding more jobs is not protectionism, but an attempt to level the playing field,” he told Reuters.

German industry association BDI expects Habeck to communicate Germany’s stated intention to “de-risk” from China rather than “isolation” and turn away from business there.

“He should explain intelligently where the limits are, why we consider China a systematic competitor and we want the reduction of market distortions,” said a BDI source.

Habeck, from the Greens group in Scholz’s coalition government, will also raise climate protection and long-standing bugs such as fair competition for German firms and open public tenders.

“We expect that the Chinese government will now be more open to change, because they must not lose Europe,” said Maximilian Butek, executive director and board member of the German Chamber of Commerce in East China.

“On the other hand, they are so competitive in so many areas that they don’t need these defenses anymore.”

When Scholz took the CEOs of Germany’s biggest companies on his trip in April, Habeck’s team focused “deliberately on SMEs to give this backbone of the German economy the recognition it deserves abroad during such a trip,” a ministry source said.

SMEs generally do not have channels in the Chinese government, the source said.

Habeck, who is visiting Beijing, Shanghai and Hangzhou, will also attend the German-Chinese Climate and Transformation Dialogue.

Before going to China, he will go to South Korea, one of the countries where German companies want to invest as part of a de-risking strategy. In Seoul he will meet Prime Minister Han Duck-soo and his counterpart, Trade Minister Ahn Dukgeun.