Countering trade bullying and "new three" enterprises

Fighting back against trade bullying reporter Wang Lijuan

Recently, the United States has wielded the "tariff stick" to China's "new three" enterprises, released the results of the four-year review of the additional 301 tariffs on China, and announced that on the basis of the original 301 tariffs on China, it will further increase the tariffs on electric vehicles, lithium batteries, photovoltaic cells, critical minerals, semiconductors, steel and aluminum, port cranes, personal protective equipment and other products imported from China.

Countering trade bullying China will take measures to defend its rights and interests

The World Trade Organization has long ruled that the U.S. Section 301 tariffs violate WTO rules. The US is now using the so-called "review" process to intensify the raising or imposing tariffs on Chinese exports to the US, and has repeatedly provoked trade disputes. In this regard, Chinese Foreign Ministry spokesman Wang Wenbin said that China has always opposed the unilateral imposition of tariffs in violation of WTO rules and will take all necessary measures to safeguard its legitimate rights and interests. The United States uses "fair competition" as an excuse to engage in protectionism and trample on the principles of the market economy and international economic and trade rules, which is naked bullying and hegemony.

The Ministry of Commerce responded that the US increase in Section 301 tariffs violates President Biden's commitment to "not seek to suppress and contain China's development" and "not seek to decouple and break the chain with China", and is not in line with the spirit of the consensus reached by the two heads of state, which will seriously affect the atmosphere of bilateral cooperation. The US should immediately correct its wrong approach and lift the additional tariffs imposed on China. China will take resolute measures to defend its rights and interests.

"The U.S. government has announced that it will further raise the Section 301 tariffs imposed on some Chinese products, and everyone is more concerned about what kind of impact it will have on China's economy. Since the beginning of this year, China's economic operation has continued to improve, the connection between supply and demand has continued to improve, and the linkage effect of the new development pattern with the domestic cycle as the main body and the domestic and international dual cycles reinforcing each other has been actively exerted, and the overall operation of the national economy has shown relatively strong resilience and potential, which is conducive to resolving the impact of external shocks. Liu Aihua, spokesman for the National Bureau of Statistics, said.

China's industrial and commercial circles have expressed resolute opposition to this. The China Council for the Promotion of International Trade (CCPIT) said that the CCPIT and the China Chamber of International Commerce, on behalf of the Chinese business community, called on the US side to earnestly abide by WTO rules, immediately cancel the additional tariffs on China, encourage the Chinese and American business communities to strengthen mutual trust and cooperation, jointly maintain the stability and smoothness of industrial and supply chains, and accelerate the recovery of the world economy.

The US will eventually turn its back on itself by wielding the "tariff stick". "Based on the experience of the U.S.-China trade war over the past five years, 90% of the cost of increased tariffs is borne by U.S. importers and passed on to U.S. downstream companies and U.S. consumers." Zhang Jianping, deputy director of the Academic Committee of the Academy of International Trade and Economic Cooperation of the Ministry of Commerce, said in an interview with a reporter from the China Economic Times.

Optimize the layout or indirectly enter the U.S. market from a third country

Among the seven industries mentioned in the U.S. tariffs, electric vehicles, lithium batteries, battery parts and critical minerals are listed, and China's electric vehicle industry chain is almost covered.

"The total amount of electric vehicles exported by the mainland to the United States accounts for a small proportion of the total exports of electric vehicles in the mainland, and the United States imposes tariffs on China's electric vehicle exports and other goods, which will not have much impact on the overall export of electric vehicles in the mainland." Zhao Fujun, director and researcher of the Comprehensive Research Office of the Foreign Economic Research Department of the Development Research Center of the State Council, said in an interview with a reporter from the China Economic Times.

According to data from the General Administration of Customs of China, in 2019, China exported only 326 pure electric vehicles to the United States, with an export value of less than $3 million. It was not until 2022 that China's exports of pure electric vehicles to the United States exceeded 10,000 units, and the export value never exceeded 460 million US dollars. According to U.S. data, Chinese-made pure electric and hybrid vehicles account for only 2% of the total number of new energy vehicles imported by the United States, which is far less than that of Germany, South Korea and Japan.

Li Ke, executive vice president and president of BYD Americas, recently responded that BYD has no plans to enter the U.S. market, so the U.S. tariff on electric vehicles produced in China to 100% has no impact on BYD.

The leading domestic connector enterprise Ruida said on the interactive platform that the United States imposed tariffs on electric vehicles, lithium batteries, photovoltaic cells and other products imported from China, the company's overseas factory business is localized production and sales, nearby service customers, not affected by tariff policies, and will be more conducive to the further expansion of overseas business.

"The impact on volume is not large, and the current layout of domestic mainstream car companies in the United States is relatively small. The impact may be more in the follow-up layout, and the tariffs have weakened the price competitiveness of China's new energy vehicles after entering the US market. Lin Xi, secretary general of the Intelligent Connected Vehicle Branch of the China-Europe Association for Economic and Technical Cooperation, pointed out to the reporter of the China Economic Times.

Zhao Fujun also said that even if mainland electric vehicles have a competitive advantage in the international market, the United States has increased the tariff on mainland electric vehicles from 25% to 100%, and the number of electric vehicles exported by the mainland to the United States and the export profits of electric vehicle companies may be greatly affected.

Countering trade bullying, the "new three" enterprises can see the moves. "The tariffs will pose a new obstacle for Chinese-related companies to expand into the U.S. market." Zhang Jianping believes that for new energy vehicles, the difficulty of entering the U.S. market in the future has increased sharply, and some companies' product profits cannot cover the cost of tariffs, so it is necessary to consider how to set up value-added links through third countries, so as to indirectly enter the U.S. market.

Diversify foreign trade paths to eliminate the impact of the "tariff stick".

What effective strategies should Chinese companies, especially those in the "New Three", adopt to minimize the impact of US tariffs?

Deploying global trade with technological innovation is the magic weapon for Chinese enterprises to go overseas. "In the face of the tariffs imposed by the United States, Chinese enterprises should accelerate technological progress and innovation, and form competitive products with technological progress and innovation, so as to hedge the impact of some of the additional tariffs." Zhao Fujun believes that it is necessary to give full play to the role of new energy vehicle companies that have been invested in the United States by the mainland, and produce electric vehicles locally in the United States to offset the impact of the tariffs imposed by the United States.

In Lin Xi's view, the export of Chinese car companies should be based on the principle of "easy first and then difficult". "The U.S. automotive standards are basically the highest in the world, which requires domestic car companies to improve their standards in R&D and manufacturing, which will increase costs. In addition, there are geopolitical implications. Therefore, even if there are no tariffs, Chinese automakers should be cautious about their exports to the United States. Lin Xi said.

In recent years, the mainland has actively expanded into emerging markets, injecting new vitality into the sustainable development of the mainland's foreign trade. "Enterprises should make good use of institutional arrangements such as free trade agreements, make use of free trade agreements signed with 29 countries, tap the market potential and space of free trade partners, and use high-quality joint construction of the 'Belt and Road' to mitigate the adverse impact from the US market through the path of foreign trade diversification." Zhang Jianping suggested.

In addition, Zhang Jianping also emphasized that the industry associations and business associations where the relevant enterprises are located should take active action to provide dynamic information support and efficient services for enterprises, and reflect the demands of enterprises to the relevant government departments in a timely manner, so as to form a cooperation mechanism between the government, industry associations and enterprises to link and coordinate with each other to better deal with this unfavorable situation.