It’s hard to pinpoint exactly which export makes Europeans most proud, but if we had to choose, we’d say cheese is pretty high on that list. So for the EU, that must make China’s recent announcement all the more irritating.
On Wednesday, China’s commerce ministry announced a new anti-dumping probe into certain dairy imports from the EU. And while Beijing claims it was just responding to local complaints about EU subsidies, this kind of timing is rarely coincidental. Word of the new probe dropped the very day after the EU confirmed it was hitting China-made EVs with new tariffs.
Now, long-time Intriguers will know this is just the latest tat in an ongoing tit-for-tat, but as it edges closer to another trade war, it’s worth an update.
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Pinpointing the opening shot is tricky in our interconnected world, but here are two big trends that arguably made this inevitable, regardless of who fired first:
- As China’s economic woes mount, it’s leaning even more on exports to sustain growth (and therefore the Communist Party’s legitimacy), but
- Those cheap exports are putting pressure on jobs in the West, where leaders were already starting to see a more assertive China as a worry.
So against that backdrop, the EU and China started firing trade investigations at one another. On EVs, the EU claims China’s manufacturers benefit “heavily from unfair subsidies”, posing an existential threat to Europe’s storied carmakers. And for its part, China is hardly the first to object to the EU’s agricultural subsidies.
But just taking a quick sample of some of the firms now caught in the cross-fire is like strolling through your local farmers market or Home Depot:
- Take vanillin, which is the key flavour component in vanilla – the EU is now investigating a complaint by its own top vanillin producer that China is putting the Belgian-French-led industry in “significant decline”.
- Meanwhile, China’s probe back into EU pork seems aimed at the Spanish, Danish, and Dutch farmers who produce most of the $3B in products the EU sells to China each year.
- Beijing’s investigation into brandy – a favourite among fictional spies and real-life folks in China – is also spooking the French, Italian, and Spanish distillers who export 20% of their good stuff to China each year.
- Plus, the EU’s probe into China’s steel pipes came after China’s low-cost offerings saw its market share in the EU quadruple in two years, reportedly forcing the closure of several plants in Germany.
- And finally, the EU’s (withdrawn) investigation into two Chinese solar-makers came just as Germany’s own top player ceased local production, after years of struggling to compete with China’s ultra-low cost offering.
Now, all this is just a snapshot of how the game is already playing out, but it leads to a bigger question: where’s it all heading?
And the EU’s outgoing top diplomat Josep Borrell is giving us a blunt answer, telling folks in Spain just on Tuesday, “we mustn’t be naïve, we have no interest to get into a trade war … but maybe it’s unavoidable, it’s also in the logic of things.”
INTRIGUE’S TAKE
That story of the EU’s recent aborted investigation into the two Chinese solar manufacturers is so illuminating: it started after two of China’s firms submitted amazingly low-cost bids for a big solar park in Romania.
But sure enough, any EU amazement quickly turned to unease: from the EU’s perspective, such low bids must’ve had help from Beijing, and the costs of that help were already starting to hit home – at that very moment, the EU’s own struggling solar sector was shutting down a fifth of its production lines.
So, why’s this illuminating? It kinda encapsulates the West’s broader China journey: from amazement at the opportunity, to unease at the trade-offs.
In the end, the EU withdrew its solar investigation, not because of a lack of evidence, but because China’s two manufacturers quietly withdrew their bids.
But that’s where this analogy seems to end: we’re not seeing any signs that China plans to withdraw from markets where the EU is feeling pain.
