German Chancellor Olaf Scholz has downplayed fears of a trade war between the European Union (EU) and China over the EU's anti-subsidy investigation into Chinese electric vehicles. Scholz emphasized the importance of globalized markets and a level playing field for all participants.
Scholz's comments, his first on the matter since the investigation was announced two weeks ago, seemingly contradicted the EU's move and warned against protectionist measures that could harm domestic industries. When asked about the possibility of a trade war between the EU and China, he stated that it would not occur.
He highlighted the importance of selling German cars not only in Europe but also in other regions such as North America, Japan, China, Africa, and South America. Scholz also emphasized that this meant Germany should be open to allowing cars from other countries into their market. He used the example of German cars being sold in Korea and Korean cars being sold in Germany to illustrate his point, questioning the need for any concern.
Germany is expected to be the most impacted EU country if a tit-for-tat tariff dispute with China were to occur. Beijing's most powerful response would likely be to restrict access to its vast market, which would significantly affect German automakers like Volkswagen and BMW, as they sold 4.6 million cars in China last year.
Initially, China responded aggressively to the EU Commission's announcement, labeling it "a naked act of protectionism." This fueled concerns about a potential trade war. However, tensions eased following a visit to China by the EU's Trade Commissioner, Valdis Dombrovskis. During the visit, the Chinese government expressed a willingness to establish various working groups, including those focused on financial services and trade.
To further deescalate any apparent tension with China on the electric vehicles issue, the president of the European Council, Charles Michel, emphasized that Europe is not seeking a trade war. Instead, the focus is on rebalancing the relationship with China to avoid excessive dependency on a single country. Michel highlighted the lessons learned from relying too heavily on Russia for fossil fuels after the invasion of Ukraine and stated that Europe is now applying the same principle to its relationship with China.
Michel expressed confidence in protecting European interests through engagement with China while addressing existing vulnerabilities. He emphasized that within the EU, there is a common view and vision of the need to rebalance the economic relationship with China.