Finimize - 😤 Europe went harder on China

What’s going on here?

The European Union (EU) announced increased tariffs on Chinese EVs in a bid to push the region’s own carmakers ahead of the competition.

What does this mean?

The EU’s new tariffs will set in from July 4th unless negotiations take place. They’ll range from 17% for manufacturer BYD to 38% for SAIC – and that’s on top of the existing 10% levy on all Chinese EVs. The EU's ramping up the tax because it's worried about cheap, Chinese government-subsidized cars pulling the rug from underneath European carmakers. And the US has gone even further. The country hiked tariffs on imported Chinese EVs in May, with rates set to quadruple from 25% to a full-on 100% this year.

Why should I care?

Zooming out: Double the damage.

Despite European carmakers feeling the pinch from the competition, they aren’t all celebrating new tariffs. German carmakers are so reliant on Chinese sales that they’ll be sweating bullets at the thought of retaliation. Case in point: China accounted for around 30% of BMW, Volkswagen, and Mercedes-Benz’s sales last quarter. Plus, many European carmakers import their own Chinese-made vehicles. So higher taxes would force them to pay extra, likely offsetting the advantage of building in China in the first place, unless they take the costly route of setting up new production sites elsewhere.

The bigger picture: Treading new ground.

China is now looking to the developing world to keep its export engine running smoothly. After all, carmakers could dodge tariffs by shipping through countries like Vietnam or Mexico on the way to their target markets. Or, they could find new markets altogether. But they’ll need to act fast. At home, consumer prices rose by less than expected in May, while factory prices dropped for the 20th month in a row. That means China’s carmakers will struggle to fetch the right prices in their local market, so their bottom lines could hinge on them sorting out their exports.

What’s going on here?

The eurozone’s industrial sector dipped in April, but that hasn’t stopped a major investment bank from expecting the region to end the year on a high.

What does this mean?

Economists had only expected the eurozone’s industrial output to tick up by a modest 0.2% in April, but even that was too high a goal. Instead, the measure declined by 0.1%, while March’s figures were revised downward to a tiny 0.5% increase. That said, the drop was mainly related to stuff like raw materials, while the output of “capital goods” – including machinery and equipment – seemed to move in the right direction. And the worst dips came from some of the eurozone’s smaller economies, with Italy the only one of “the big four” to slip.

Why should I care?

For markets: Europe’s talking politics.

The eurozone now needs to pin its hopes on the service industry, which is still feeling the weight of high interest rates and inflation. To make matters worse, Europe is rattled by political turbulence, with alarms ringing about a potential increase in right-wing governance that could exacerbate the region’s financial worries. Still, Citigroup’s analysts predict the European STOXX 600 index to ramp up by 11% by the end of the year, saying it could hit even bigger numbers if interest rates are cut.

The bigger picture: The scissors are under lock.

Rapidly fluctuating economic updates are making it tough to get a read on how a country’s really doing right now. One week, an economy can seem strong enough to risk sparking up inflation. Another, it could be teetering on the weak side. This week’s figures fell into the second category: China and the UK both released data that pointed toward faltering economies. So remember to zoom out to the wider picture – and be extra cautious: conflicting data often comes out when the economy’s at a turning point, for better or for worse.