EU's Borrell Says Trade War With China is 'Maybe Unavoidable'

The European Union’s top diplomat Josep Borrell has warned that a trade war with China may be “unavoidable.”

Borrell, the EU’s High Representative for Foreign Policy, made the remark at an event in Spain on Tuesday in regard to retaliatory action over Europe’s imposition of tariffs on electric vehicles made in China.

He was quoted as saying: “We mustn’t be naive, we have no interest to get into a trade war .. but maybe it’s unavoidable. It’s also the logic of things.”

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Borrell’s remarks came as the European Commission proposed on Tuesday tariffs of up to 36.3% on electric vehicles made in China. That spurred a sharp response from Beijing on Wednesday, which said it would launch an anti-subsidy probe into dairy imports from the EU.

Borrell, who is due to retire in October, said the EU should avoid “systematic confrontation” with China, as trade tensions between the two sides threaten to intensify.

“Our political systems are different, but that shouldn’t lead to a systemic and permanent rivalry,” he said, during the annual “Quo Vadis Europa?” conference in the city of Santander. “That’s not in our interest.”

He noted that cheaper products made in China such as electric vehicles were being diverted to Europe because the US had imposed higher tariffs.

“When they (the US) take trade measures against China – because they do so – they don’t ask us if it suits us or not (in Europe),” Borrell was quoted as saying by Euronews.com.

“When they ban the import of Chinese cars, or place deterring tariffs, they don’t ask themselves where these Chinese cars that will not go to the US will go. Where will they go? To which other market can they go? Well of course, to the European market, and that causes a competitiveness problem for our industry,” he added.

But he said European leaders had no interest in “containing China’s rise”.

“We cannot embark on systematic confrontation with China,” he said, noting that China’s Foreign Minister Wang Yi regularly pushed back when it was depicted as a “systemic rival.”

“Europe must not oppose itself to China’s rise, because this rise is a fact – China … is at the cutting edge of all technology,” Borrell said.

“They are not only selling cheap T-shirts, they are competing. To oppose ourselves to the rise of China as a power is impossible – China is a great power.”

Borrell also voiced doubt on the chance of an investment deal between China and the EU being revived, according to a report by the South China Morning Post.

Beijing, business groups not happy

Meanwhile, the reaction in Beijing was more emotive, with an industry group saying they felt the decision lacked objectivity and fairness and others warning that the tariffs would deter Chinese investment.

Chinese Foreign Ministry spokesperson Mao Ning said the move “ignores the facts, disrespects WTO rules, goes against the trend of history, disrupts the EU’s green transition process and global effort to respond to climate change, and will harm the EU itself as well as others.”

Officials quoted by the state-owned Global Times described the outcome as “typical protectionism” and “politically motivated action” that would undermine mutual trust and cooperation between the two sides.

Industry representatives said it would have a “profound negative impact on the broad economic and trade cooperation between China and the EU.”

The China Association of Automobile Manufacturers (CAAM) issued a statement saying the EC’s move had brought great risks and uncertainties to Chinese companies in operating and investing in the EU and damaged their confidence in EU market.

The EU, it said, had also intensified crackdowns on Chinese products and companies under its Foreign Subsidies Regulation, which had led to some Chinese firms backing out of projects in Europe.