One-third of EU firms hit hard by US-China trade war

The ongoing trade tensions between the world's two largest economies and tit-for-tat tariffs have adversely affected the fortunes of many European companies in China, a new survey reveals. The outlook remains gloomy.

The increasingly bitter trade dispute between the US and China is hurting one-third of EU companies operating in China, the European Union Chamber of Commerce in China said on Monday. The industry body commissioned a survey to find out how recent tariff hikes were affecting business.  

The study, which received replies from 585 firms, was conducted in January and February, as trans-Pacific trade tensions eased following a truce between US President Donald Trump and his Chinese counterpart Xi Jinping.

Read more: How much damage are Trump’s tariffs doing to the Chinese economy?

But the tensions ratcheted up again in early May with Washington and Beijing slapping steep increases in tariffs on each other.

The survey said its results are "contrary to expectations that European companies would benefit" from the duties.

"The European chamber disagrees with tariffs," said Charlotte Roule, the chamber's vice president. Nevertheless, she added, China needs to further open its market to foreign companies.

Trump's tariffs and who they target

Solar panels and washing machines

The first round of tariffs in 2018 were on all imported washing machines and solar panels — not just those from China. A study by economists from the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the burden of Trump's tariffs — including taxes on steel, aluminum, solar panels falls entirely on US consumers and businesses who buy imported products.

Trump's tariffs and who they target

China hike

On Friday May 10, 2019 President Donald Trump imposed sanctions on $200 billion (€178 billion) worth of Chinese goods. The move rasied tariffs from 10% to 25% on a range of consumer products, including cell phone, computers and toys. China's Commerce Ministry said it "deeply regrets" the US decision.

Trump's tariffs and who they target

Issues with the EU

In April 2019, the United States said it wanted to put tariffs on $11.2 billion worth of goods from the EU. The list includes helicopters and aircraft from Airbus as well as European exports like: famous cheeses like Stilton, Roquefort and Gouda, wines and oysters, ceramics, knives and pajamas.

Trump's tariffs and who they target

EU fights back

The EU imposed import duties of 25% on a $2.8 billion range of imports from the United States in retaliation for US tariffs on European steel and aluminum. Targeted US products include Harley-Davidson motorcycles, bourbon, peanuts, blue jeans, steel and aluminum.

Trump's tariffs and who they target

European automakers next?

May 17, 2019 is the deadline for President Trump to decide on imposing tariffs on vehicle imports from the EU. According to diplomats, Germany, whose exports of cars and parts to the United States are more than half the EU total, wants to press ahead with talks to ward off tariffs on automakers Volkswagen, Mercedes and BMW.

Trump's tariffs and who they target

India not exempt

India, the world's biggest buyer of US almonds, on June 21, 2018 raised import duties on the nuts by 20% and increased tariffs on a range of other farm products and US iron and steel, in retaliation for US tariffs on Indian steel. Trump said last month that he would end preferential trade treatment for India, which would result in US tariffs on up to $5.6 billion of imports from India.

Trump's tariffs and who they target

North American neighbors in tariff spat

Mexico on June 5, 2018 imposed tariffs of up to 25% on American steel, pork, cheese, apples, potatoes and bourbon, in retaliation for US tariffs on Mexican metals. While to the north, Canada on July 1 imposed tariffs on $12.6 billion worth of U.S. goods, including steel, aluminum, coffee, ketchup and bourbon whiskey in retaliation for US tariffs on Canadian steel and aluminum.

Forced tech transfers on the rise

Europeans say they share many of the grievances raised by the Trump administration regarding trade with China. "The fundamental issues driving the trade war need to be resolved by addressing market access barriers and regulatory challenges while also tackling state-owned enterprises (SOE) reform and forced tech transfer," Roule stressed.

Read more: Will Chinese investments in the EU keep plummeting?

One of the key problems European companies are confronting is forced technology transfers, the survey showed. The problem has worsened over the past year, with some 20% of respondents saying they felt compelled to transfer technology in order to maintain market access, up from 10% in 2017.

For almost a quarter (24%), such transfers were currently under way. This state of affairs was "not acceptable," Roule said. "The authorities are saying there are no technology transfers any more but this is not what we see in our survey," she added.

Unfair technology transfers were reported predominantly in the fields of chemicals and petroleum, medical devices, pharmaceuticals and automotive.

Furthermore, over half of the companies said legal protection of intellectual property was "inadequate," and 45% say they suffer "unequal treatment" compared to their Chinese counterparts. State firms and their subsidies are the main bone of contention.

Besides the US-China trade conflict, EU firms said they were concerned about China's economic slowdown, the global economic slowdown and rising labor costs.

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Business | 14.05.2019

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sri/rt (AFP, dpa)

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