Asian Stock Markets React to European Duties
Asian stock markets exhibited mixed reactions following the imposition of heavy European duties on Chinese imports. While Tokyo remained flat, Shanghai and Hong Kong faced declines of 0.26% and 0.74% respectively. In contrast, Shenzhen bucked the trend with a 0.76% rise. Seoul's market surged by 1.16%, bolstered by strong earnings from Samsung.
The closure of American markets for Independence Day led to subdued trading activity as investors awaited key US non-farm payrolls data. European indices and Wall Street futures, however, are expected to rise following the Labor Party's victory in the UK elections and the exclusion of Marine Le Pen's far-right party from an absolute majority in the upcoming French legislative elections.
EU Imposes Additional Duties on Chinese Electric Vehicles
In a significant move, the European Union has imposed up to 38% additional customs duties on imports of Chinese electric vehicles, accusing Beijing of illegally subsidizing its manufacturers. This decision follows a comprehensive anti-subsidy investigation initiated in October 2023. The new duties, which are set to take effect from Friday, add to the existing 10% taxes on vehicles produced in China.
Brussels' actions mirror those of the United States, which recently increased customs duties on Chinese electric vehicles to 100%. The European automobile industry, traditionally strong in gasoline and diesel engines, fears losing ground to Chinese electric vehicle manufacturers, who currently hold a 22% market share in Europe.
The European Commission has set a four-month window to finalize these duties, leaving room for dialogue with China. Despite ongoing consultations, the EU remains firm on its stance, with provisional duties ranging from 17.4% to 37.6% on various Chinese manufacturers. Germany, Sweden, and Hungary have expressed concerns over potential reprisals, while France and Spain support the measures.
- The European Commission's investigation revealed that the Chinese electric vehicle sector benefits from unfair subsidies, posing a threat to European producers. As a result, Brussels aims to protect its industry, which employs 14.6 million workers, while avoiding a trade war with China.
- China has already voiced strong opposition to the EU's measures, labeling them as 'purely protectionist' and threatening to defend its interests. This development is part of broader commercial tensions between Western nations and China, which has been accused of undermining competition in various sectors, including wind turbines, solar panels, and batteries.
- Germany's significant involvement in the Chinese market has led to its resistance against the new duties, fearing negative impacts on major car manufacturers like Audi, BMW, Mercedes, and Volkswagen. Conversely, France and Spain advocate for proportionate measures to counteract the perceived threat from Chinese electric vehicles.
- The EU's decision to impose these duties aims to slow down, but not completely halt, imports of Chinese electric vehicles. This approach aligns with World Trade Organization (WTO) rules and seeks to balance protection of the European market with maintaining economic relations with China, the EU's second-largest trading partner after the United States.
