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Tough road ahead for Chinese EVs as EU revs up tariffs

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Efforts are underway to avert an all-out trade war between the EU and China following the European Commission’s announcement of a steep tariff hike of up to 38.1% on Chinese-made electric vehicles, effective July 4th. Coming on the heels of a 102.5% tariff by President Joe Biden last month, and with Canada likely to follow, the Chinese EV industry is facing a watershed moment.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

Chinese media has been quick to condemn the European Commission’s move, terming it as “misguided” and a “thinly veiled excuse for protectionism.” But, the EU and the rest of the world are actually playing catch up with a world leader in manufacturing and market for EVs.

According to Canalys, China, with a 55.5% share, is the largest EV market. By industry estimates, the country currently has an excess auto production capacity of approximately 10 million EVs. The top position was not attained by chance. It is the result of decades of state policy and systematic investment.

In a concerted effort to make the Chinese automobile industry competitive, reduce reliance on imported oil, and drastically cut down on air pollution that was making some of its largest cities inhabitable, Beijing created a roadmap and started investing in an emerging tech of the time – electric vehicles and allied sectors.

In 2001, China introduced EV technology as a priority science research project in the Five-Year Plan. Beijing offered subsidies and tax breaks and committed enormous resources to the sector. Within a decade, subsidies were extended to EV manufacturers for producing mass transit vehicles like buses in addition to cars. It is estimated that the EV sector received over 200 billion RMB ($29 billion) as subsidies and tax breaks from 2009 to 2022.

Beijing did not merely boost its manufacturing capacity or invest in tech research; parallelly, it nurtured a domestic market. For instance, Shenzhen was the first city to completely electrify its public bus fleet. As tech improved and prices moderated, citizens were offered incentives for opting for an EV, creating domestic demand. EV exports have also grown steadily. 37% of Chinese EVs were exported to EU member states in the first four months of the year alone.

Meanwhile, China remains the vital cog in EV manufacturing and supply chains. In the past decade, Chinese companies have switched to safer and cheaper lithium iron phosphate batteries (LFP) from lithium nickel manganese cobalt (NMC) types after narrowing the energy density gap between the two. China’s possession of much of the world’s refinery capacity for critical components like cobalt, nickel sulfate, lithium hydroxide, and graphite gives China and Chinese companies a distinct edge.

China is unlikely to take the tariff rise in its stride. The hike, over and above the EU’s standard 10% car tariffs, will make Chinese-manufactured EVs far less competitive, price-wise. Incentives are already being offered. Beijing has offered to lower the existing 15% tariff on imported large-engine vehicles from EU countries, which will significantly benefit German automakers, according to Bloomberg.

As the world’s second-biggest economy, China is in a position to impose retaliatory tariffs, which could devastate sectors ranging from food to machinery and automobiles to luxury items. Losing out on the growing Chinese market could severely impact the balance sheets of many EU companies.

The German Association of the Automotive Industry said, “The potential damage that could be caused by the measures now announced may be greater than the potential benefits for the European—and in particular the German—automotive industry.”

It is believed that talks between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Valdis Dombrovskis will begin soon to discuss the matter. According to Chinese state media, Mr. Wang said, “If the EU is sincere, China hopes to start negotiations as soon as possible; if the EU insists on its own way, China will take all necessary actions to defend its own interests.”

As things stand, the world is a deeply divided place. China, aligned with Russia in the Ukraine War, is seen as the opposition. While it is necessary to level the playing field, an ill-timed trade war could only worsen matters.

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TIPP Takes

Geopolitics, Geoeconomics, And More

1. Israel Warns Can Send Lebanon ‘Back To Stone Age’ As UN Seeks De-Escalation – Al Jazeera

“We do not want war, but we are preparing for every scenario,” Israeli Defense Minister Yoav Gallant told reporters in Washington, DC. Israel was capable of taking “Lebanon back to the Stone Age, but we don’t want to do it,” he said.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs
Israeli Defense Minister Yoav Gallant

Meanwhile, UN humanitarian affairs chief Martin Griffiths called Lebanon “the flashpoint beyond all flashpoints.” U.S. Defense Secretary Lloyd Austin told Gallant that another war with Hezbollah could have “terrible consequences for the Middle East” and urged a diplomatic solution.


2. Erdogan Accuses West Of Backing Israeli Plans To Attack Lebanon, Spread Regional War – AFP

“Israel is now setting its sights on Lebanon, and we see that Western powers behind the scenes are patting Israel on the back and even supporting them,” he told lawmakers from his ruling AKP party.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

Israeli Prime Minister Benjamin “Netanyahu’s plans to spread the war to the region will lead to a great disaster,” he said.


3. Trial Of Journalist Gershkovich Under Way In Russia As U.S. Calls For His Immediate Release – RFE/RL

The U.S. Embassy in Moscow, whose representatives were given brief access to the hearing, said that Russian authorities failed to provide evidence to back the espionage charges.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs
Evan Gershkovich

The embassy’s statement also called for Gershkovich’s immediate release and urged Moscow to stop using U.S. nationals as leverage for political ends.


4. Russian Indicted In U.S. For Alleged Cyberattacks Against Ukraine Before War – RFE/RL

The man named in the indictment, Amin Stigal, allegedly conspired with Russia’s GRU military intelligence agency and then launched cyberattacks against the Ukrainian government just before Russia’s full-scale invasion in 2022, the U.S. Justice Department said.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

According to court documents, Stigal and members of the GRU conspired in January 2022 to use a U.S.-based company’s services to distribute malware to dozens of Ukrainian government entities’ computer systems and destroy them and related data stored on them in advance of the Russian invasion.


5. Indian Imports Of Russian Coal Fall, U.S. Shipments Rise – Reuters

Data from coal consultancy Bigmint showed that Indian imports of Russian coal have declined while U.S. shipments rose in the three months ending in May. Traders attributed this to Russian supplies becoming less competitive.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

India is Russia’s second-largest coal market after China, and the decrease follows fresh Western sanctions on Russia because of the war in Ukraine. Amid the lower Indian exports, Russia’s push of coal shipments to China climbed to the highest in eight months in May.


6. Taiwan Probes Reports Of Direct Chinese Influence At TV Station – RFA

Taiwan authorities are investigating reports that a journalist from China’s state news agency Xinhua played a key role in editing the content of a political talk show at one of the island’s TV stations.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

A Taiwanese newspaper, Liberty Times, reported that an unnamed Taiwanese broadcaster had accepted editorial direction from Xinhua correspondent Zhao Bo. Zhao allegedly edited scripts and also had private conversations with the guests, during which she made clear exactly which angles she wanted to emphasize.


7. Pentagon Doesn’t Know If It Funds Dangerous Biological Research In China, New Audit Reveals – Just The News

Despite years of warnings that China operates an illicit biological weapons program, the U.S. military remains unable to determine whether it sends American tax dollars to Beijing for research that could make pathogens more dangerous or deadly, the Pentagon’s chief watchdog declared in a stunning new warning to policymakers.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

8. Saudi Defense Chief In China In Bid For Help With Houthis, Boost Military Ties – Al-Monitor

During his first visit to Beijing, Saudi Defense Minister Prince Khalid bin Salman bin Abdulaziz Al Saud discussed ways to boost relations between Saudi Arabia and China as Chinese weapons exports to the kingdom increase.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

Grant Rumley, a senior fellow at the Washington Institute for Near East Policy, said that the reason for Prince Khalid’s visit is Riyadh leaning on China to curb attacks by the Houthi rebels in Yemen on ships in the Red Sea.


9. U.S.: China Still Arresting ‘Thousands’ Each Year For Practicing Faith – RFA

The 25th annual Report on International Religious Freedom released by Secretary of State Antony Blinken says China’s constitutional guarantees to religious freedom are obstructed by regulations that “require clergy to pledge allegiance to the CCP.”

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

The report says Chinese authorities have recently begun a campaign to enforce those regulations after an “administrative measure” issued in September 2023 that requires religious centers to comply.


10. Dutch PM Mark Rutte Officially Appointed NATO’s Next Boss – Reuters

NATO allies selected Dutch Prime Minister Mark Rutte as NATO’s next boss. The war in Ukraine rages on its doorstep, and uncertainty hangs over the U.S.’s future attitude to the transatlantic alliance.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs
Dutch Prime Minister Mark Rutte

Rutte’s appointment became a formality after his only rival for the post, Romanian President Klaus Iohannis, announced last week that he had quit the race, having failed to gain traction.


11. Germany’s New Citizenship Reform Takes Effect – D.W.

More people are set to become German citizens as the government’s new citizenship reforms took effect on Thursday, June 27, 2024.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

The liberalization means Germany will, for the first time, allow multiple citizenship on principle — rather than as an exception for EU and Swiss nationals and those who can prove “special hardships.”

The opposition parties, the Alternative for Germany (AfD), which is partly made up of right-wing extremists, and the conservative Christian Democrats (CDU), claim that the German passport will become cheapened.


12. North Korea Says It Successfully Conducted Multiple Warhead Missile Capability Test – Yonhap

The Korean Central News Agency (KCNA) reported that the North’s Missile Administration “successfully conducted the separation and guidance control test of individual mobile warheads” during Wednesday’s test.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

The North said the test was “aimed at securing the MIRV capability,” referring to multiple independently targetable re-entry vehicle technology. This technology allows a single ballistic missile to deliver multiple warheads to different targets.

The claims contradicted South Korea’s assessment that the test is believed to have failed.


13. Japan’s 310-Mile Conveyor Belt To Carry Freight Of 25,000 Trucks A Day – Interesting Engineering

The Japanese government recently announced plans to launch a network of hi-tech, automated conveyor belts, namely the Autoflow-Road, to transport goods over an estimated 310 miles between Tokyo and Osaka.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

The project aims to address a looming logistics crisis caused by a severe delivery driver shortage and increasing freight demands, reported South China Morning Post.

The Autoflow-Road system, which is currently in the planning phase, will be installed in tunnels beneath major highways, on above-ground tracks in the middle of roads, and along the hard shoulders of motorways.


14. U.S. Jails Honduras Ex-President For 45 Years On Drug Charges – D.W.

Juan Orlando Hernandez faces 45 years in jail after being convicted of helping to traffic vast amounts of cocaine into the U.S.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

U.S. federal prosecutors say that Hernandez turned Honduras into a “narco-state” during his 2014-2022 tenure. In March, he was convicted of facilitating the trafficking of some 500 tons of cocaine — most of it originally hailing from Colombia or Venezuela — to the U.S. via Honduras.


15. Meat Alternatives Might Be Healthier For Heart Than Meat – HealthDay News

A new review finds that even though plant-based meat alternatives are ultra-processed, they may still be healthier for your heart than traditional meat.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

In one clinical trial reviewed, people consuming plant-based alternatives saw a 13% reduction in total cholesterol, a 9% reduction in LDL cholesterol, a 53% reduction in triglycerides, and an 11% rise in “good” HDL cholesterol. Still, the researchers did find a wide variation in the nutritional value of meat substitutes, such as in the amount of sodium and saturated fat they contained.


16. Mom’s Smartphone Use Might Affect Baby’s Language Development – HealthDay News

Researchers found that moms talked 16% less to their babies when they were fiddling with their phones. Shorter 1-—to 2-minute intervals of phone use interfered with mom-baby interaction even more, decreasing a mother’s baby talk by 26%.

Tough Road Ahead For Chinese EVs As EU Revs Up Tariffs

Researchers said prior research has suggested that parents’ phone use could affect a child’s language development. They added that parents could be underestimating the impact of phone use on their behavior with their infants.


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