Capital Economy, Business and Finance
China has slapped a cognac tax on the EU in retaliation for the EU’s latest tariffs on Chinese EVs. This is not a tit-for-tat tariff by value. EU imports of Chinese EVs are worth nearly six times Chinese imports of European brandy. Rather it’s a signal from Beijing that it knows which countries voted for the EV tariffs – France chief among them – and will aim to punish them selectively (Germany, whose car makers are desperate to protect their access to China, voted against and doesn’t make cognac). Brussels knows keeping cheap Chinese EVs out of Europe means going electric will remain too expensive for most people. It also knows China will go on subsidising EVs whatever Europe does, to create and dominate an enormous new market as it did with solar panels. The trade-off here was between protectionism disguised as fair play and turning a blind eye to Chinese dumping for the sake of the planet. Protectionism won. An opening for Brexit Britain? David Lammy heads to Beijing next week for a reset.
