(Bloomberg) --
German Vice Chancellor Robert Habeck arrived in Beijing for talks with top leaders in the world’s No. 2 economy, with looming European tariffs on Chinese electric cars high on his agenda.
Habeck will sit down with Commerce Minister Wang Wentao and other officials during his three-day trip. He is the first senior European official to visit China since the bloc announced its plan this month for levies as high as 48% on EVs shipped from the Asian nation.
As one of Europe’s leading economies and its biggest car producer, Germany is in a “special situation” in the current trade tensions, said Habeck, who also serves as his nation’s economy minister.
“I have resolved to encourage the Chinese to discuss this with us, not to simply let things run their course and escalate,” he added, speaking Friday before boarding a flight to China from South Korea, another nation trying to balance trade tensions between the world’s largest economies.
After landing in Beijing, Habeck described Germany’s relationship with China as “complex and demanding.”
“I would highlight the subsidies that the Chinese government hands out, which mean that goods are produced more cheaply than the real market value and then end up for sale in Germany and Europe and undermine or even ruin the markets there,” he told reporters.
He said a meeting with Premier Li Qiang he had hoped to have won’t take place and that he didn’t know why it hadn’t worked out.
Europe’s relationship with China has deteriorated in recent years, soured by spats over human rights, trade and President Xi Jinping’s support for Russia in the wake of its invasion of Ukraine. The European Union has opened a slew of investigations into China, citing unfair trade practices such as massive state subsidies.
Any negotiations over the EV tariffs will likely be limited, as the European Commission’s probe was “extensive” looking across the whole of China’s economy, said Jacob Gunter, a senior economy analyst at the Mercator Institute for China Studies in Germany.
Even if Beijing were to promise to “profoundly reform its entire economic structure” it would take years to do, he added. Talks are more likely to yield progress in other probed areas, such as China’s procurement of medical devices, where the EU says Beijing favors domestic suppliers. “That’s something that Xi Jinping could theoretically change quite quickly, if he so desired, ” Gunter added.
Chinese state media portrayed the German official’s visit as a sign of “the open attitude of China and some politicians in the EU in seeking dialogue and cooperation.”
“It is hoped that Habeck’s visit could lead to more productive discussions on economic and trade issues, particularly in the realm of EVs, and infuse fresh energy into the ongoing development of China-EU economic and trade relations,” wrote the state-run Global Times tabloid in an editorial.
Those comments underscore China’s long-held strategy of taking advantage of divisions within the EU to advance its own interests. Xi’s trip in May to France for talks and a day of bonhomie with President Emmanuel Macron — whose country has been a key supporter of the EV probe — was seen as an effort to sew division within the bloc.
In recent months, Chinese government departments, party-controlled media and other state-affiliated groups have rolled out an escalating campaign of threats targeting French brandy, Spanish ham, German large-engine vehicles and other goods.
China’s goal is to convince enough European countries that the tariffs are a bad idea so they will oppose or water down the final levies, which will be imposed in November. The hope is that the threat of retaliation generates enough pain in those countries to pressure their governments to persuade the EU to back down.
Beijing has used the tactic of economic coercion to punish nations before with limited success, with such a campaign in Australia winning slim concessions. Such moves also risk generating a backlash against China, which could harden attitudes and lead to further retaliation.
The German government is critical of the EU’s decision to implement tariffs against Chinese EVs.
Although Foreign Minister Annalena Baerbock spoke out in favor of them last month, the leading actors of the three-way coalition – Chancellor Olaf Scholz of the Social Democrats, Finance Minister Christian Lindner of the Free Democrats and Habeck – are worried the dispute with China would further hurt the German economy, which has already been battered by the war in Ukraine and has one of the lowest growth rates among the industrialized nations.
Habeck is one of the pro-business pragmatists within his Greens party, and as economy minister has spoken out against protectionism and in favor of free trade.
Bloomberg reported last week that the government in Berlin is working to prevent the EU’s new tariffs on Chinese electric vehicles from coming into force — or at least soften them should a full halt not be possible.
Transport Minister Volker Wissing of the business-friendly Free Democrats, who will visit China next week, staunchly opposes the tariffs, arguing recently that they could hurt German industry. That’s certainly the view of German business in China, who said recently that tariffs won’t protect the car industry.
“It is out of the question that the conflict will be settled in China while I am here,” Habeck said in Seoul, managing expectations for his trip. “I cannot negotiate for the EU either. These are talks that have a fixed format.”
