EU and China to kick start tariff war

---

Any future tariff war between China and the EU is likely to leave both economies reeling, the EU acted first by imposing tariffs on Chinese built alloy wheels which threatened European wheel companies with their low prices, on the other hand the Chinese car market has been a savior for the Euro car market during 2009 and 2010.

From Bloomberg:

A special EU trade committee is to vote Tuesday on a measure that would extend antidumping duties in place since May and raise them to 22.3% from 20.6%. People familiar with the committee’s thinking say it is likely to approve the move, which then must be ratified by EU governments.

A new round of tariffs could spark an automotive trade war with China—a prospect that could hurt European car makers such as Daimler AG and Volkswagen AG, for which China’s booming auto market has become a major source of profits.

“Trade disputes with China used to be about bras, T-shirts, shoes and ironing boards,” says Simon Evenett, a professor of trade economics at the University of St. Gallen in Switzerland. “Now they’re moving downstream, and increasingly, they’re going to be about cars.”

But the trade picture on autos is far from black and white. Europe’s auto makers and parts companies are deeply divided over the tariff move, with car manufacturers lobbying fiercely against the measure, and producers of components campaigning in favor.

Here in Landau in southern Germany, wheel maker Ronal AG’s highly automated factory employs 480 people, who work molding and polishing aluminum wheels for high-end cars. The plant churns out two million wheels annually.

Ronal has pushed hard for the antidumping tariffs. Oliver Schneider, a sales manager at the company, says: “We need these duties if we want to keep growing our business.”

Without the tariffs, the company says, jobs for workers in the Landau factory and at other plants across Europe that together produced 10 million wheels last year could be lost. Because of Chinese competition, Ronal says, it hasn’t opened a new plant since 2006.

Ronal and other wheel makers are at odds with many of their big customers in Europe. Auto makers say the tariffs risk reprisal by the Chinese, which could hurt car and auto-part exports to China, the world’s fastest-growing major automotive market, and also drive up the cost of vehicles in Europe.

Read the rest at the Bloomberg site.