Chinese President Xi Jinping seems to have Hungarian Prime Minister Viktor Orban on retainer as his European Union political prostitute. (Orban has even fooled a gullible former President Donald Trump into thinking he’s America’s friend.) Xi has also bought the support of Spanish Prime Minister Pedro Sanchez and German Chancellor Olaf Scholz. Unfortunately for communist China, though, the EU has now imposed tariffs to address Chinese dumping into its market.
The tariffs focus on Chinese electric vehicle manufacturers and will be imposed at rates between 17% and 35.3%, depending on the manufacturer. These rates were finalized Wednesday after the EU-China negotiations, which had been underway since July, failed to reach a compromise. The EU action is necessary because Chinese EV manufacturers are very heavily subsidized by the Chinese government.
China is relying on these subsidized exports in an effort to dominate the European marketplace. It needs these exports in order to offset a continuing malaise in the Chinese economy. Once a powerhouse set upon a seemingly inexorable rise, China’s economy is now weighed down by heavy debt, high youth/graduate unemployment rates, excessive regulation, and politically motivated interference against private commerce. Foreign investment is declining, and demographic implosion is looming.
Still, the EU tariff action is a big deal. Beijing is shocked and infuriated that its traditionally successful efforts to divide and conquer the political union have failed thus far. As Reuters reported, China is now attempting to gain new leverage by directing car manufacturers to stop building plants in EU countries that do not sufficiently oppose the EU tariffs regime. This effort underlines two points of note. First, China’s desire to weaken the EU by playing to divide national interests over EU interests at large. Second, the absolute subordination of all Chinese companies to the Communist Party.
China’s Global Times state media outlet called for retaliatory action Thursday. It warned, “China’s restraint could even be interpreted as a sign of weakness, potentially emboldening the EU to pursue even more stringent protectionist policies.”
“The ultimate goal is to push the EU to return to the negotiating table and resolve these disputes through constructive dialogue and consultation, fostering a more balanced and equitable trade relationship that benefits both parties,” the outlet added.
However, what Xi really wants is to force the EU to its knees so he can secure trade arrangements that are far more favorable to China than they are to the EU. China embraces the Orwellian mantra that “all animals are equal, but some animals are more equal than others.” When it comes to trade negotiations, it truly wants to eat the EU’s lunch and have the EU thank it for doing so. Or, as China likes to put it, pursue “win-win cooperation.”
The EU now faces a choice between courage and appeasement.
EU Commission President Ursula von der Leyen deserves significant credit for these tariffs. She has pushed for a more coordinated and tougher EU response to Chinese trade manipulation and other challenges to the EU. She is detested by Beijing because she actually fights for EU interests and values. Beijing much prefers EU Council President Charles Michel, who was the Belgian prime minister between 2014-2019 and the poster child for defense freeloading in NATO. Just as he was a useful idiot for Russian President Vladimir Putin before, Michel is now choosing supplication toward Xi.
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This is just the beginning of this battle. However, if they want to protect the longer-term prosperity of both their individual member states and the political union at large, EU members will have to hang tough.
Xi isn’t trying to make friends. He’s trying to make fiefdoms.