By Joe Cash and Laurie Chen
BEIJING (Reuters) – Fears of a widening tariff war between China and other major exporting nations are keeping diplomacy between the world’s second-largest economy and the European Union alive, even as trade talks over electric vehicles stall.
While the U.S. election on Tuesday is almost certain to result in more American curbs on Chinese goods, European negotiators are investing in a longer game that may yield no immediate resolution but would at least stop an escalating trade conflict.
Some EU member states are even using the dispute to bolster bilateral ties away from the Brussels-Beijing negotiations and attract fresh investment from China.
“I don’t think China wants this thing to significantly torpedo the EU-China relationship, especially given the fact we will probably be seeing a very different world (after the U.S. election),” said Bo Zhengyuan, a Shanghai-based partner at Plenum, a consultancy.
New EU tariffs of up to 45.3% on Chinese EV imports came into effect last week after a year-long investigation that divided the bloc and prompted retaliation from Beijing.
Brussels maintains that Beijing doles out unfair subsidies to its auto industry and refuses to accept China’s counter-offer of minimum import prices. Beijing hit back with probes into Europe’s pork and dairy industries and imposed curbs on brandy imports.
Beyond the headlines, however, is a more complicated series of negotiations.
Beijing has in recent months hosted a procession of official visits from the EU and its member states.
A French junior trade minister is visiting Shanghai this week, with Paris keen to continue developing commercial ties in China’s financial capital.
France is also a “Country of Honour” at China’s annual flagship import expo, despite Beijing having placed retaliatory import tariffs on its brandy.
While little progress has been made in even approaching a resolution, engagement remains a priority, analysts say.
“I am not terribly optimistic that the Chinese side will put anything on the table that the EU will accept, but I probably should also be curbing my pessimism a bit, and would not discount a solution,” said Max Zenglein, chief economist at Merics, a Berlin-based China studies institute.
“I am sure certain member states will be pushing for this to demonstrate their willingness or ability to work out a deal.”
A DIVIDED UNION
As Washington steps up its curbs on Chinese products, Beijing is wary of broader damage to its trade ties with the EU, worth $783 billion last year.