Using the International Monetary Fund parameter for globalization, which is the sum of exports and imports of all economies in relation to global gross domestic product, globalization began to slow down after the financial crisis of 2008. Now, the war in Ukraine and the increase in geopolitical competition threaten to slow it down even further. Although global trade reached a record $32 trillion in 2022, the major trade blocs are closing in on themselves in the name of security and national competitiveness.
The opening of trade, which took off in the 1950s after World War II and with the end of the Cold War in the 1980s, accelerated with the establishment of the World Trade Organization in 1995, allowing China to surpass the United States and become the largest trading nation today.
This shift in the geopolitical landscape has created many tensions internationally, leading to the implementation of Re-shoring policies and a relocation of production activities to their respective national territories driven by substantial government subsidies and incentives.
This regionalization is not a return to the nationalism of the 1930s but a search for a middle ground between nationalism and unrestricted global trade.
The deglobalization of trade began with the 2008 financial crisis, but the pandemic has accelerated it: protectionist measures worldwide have risen to about 3,000, including tariffs, sanctions, and export quotas, with a 714% increase from 2008 to 2022. The return to commercial protectionism also affects the European Union, with 350 different regulatory requirements to comply with for imports and exports, posing a significant challenge for all operators in international trade.
European tariffs on Chinese electric cars
More recently, leveraging European Regulation 2016/1037 on defense against subsidized imports from non-EU countries, the Commission carried out an investigation in the past nine months to assess the amount of public subsidies provided to Chinese electric car manufacturers. It emerged that major Chinese automotive companies are receiving subsidies allowing them to export their cars to Europe at prices below production costs, resulting in unfair competition.
To discourage the purchase of these cars, the European Commission is considering increasing the current 10% tariffs based on the amount of subsidies received by the company and its cooperation and transparency with the EU executive. SAIC will face additional duties of 38.1%, Geely 20.0%, BYD 17.4%, and other companies in the sector will have an average rate of 21.0%. Analysts suggest that this policy could negatively impact demand if the total tariffs exceed 50.0%. The tariffs will be provisionally effective from July 4, 2024, and likely permanently in November of the same year.
As an example, considering BYD’s range, the Dolphin would cost €36,150 compared to the previous €30,790; while for the Volvo brand (part of the Geely group), the EX30 model would increase to €42,150 from €35,900. These prices are for the base models.
This action will not only affect Chinese companies but also European car manufacturers producing in China. An example is BMW, which produces the new Mini Cooper electric car through the “Spotlight Automotive” joint venture with the Chinese Great Wall Motor group.
The European choice to take this path stems primarily from technological backwardness in the electric segment and secondly from the desire to induce the opening of further production facilities in Europe through the granting of state subsidies or due to the cost/benefit of owning an activity outside national borders.
