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China wants EU to scrap EV tariff plans as talks start

By Joe Cash and Ryan Woo

BEIJING (Reuters) -Beijing wants the EU to scrap plans to impose preliminary tariffs on Chinese electric vehicle imports by July 4, China's state-controlled Global Times reported, after both sides agreed to negotiate a possible compromise.

Provisional European Union duties of up to 38.1% on imported Chinese-made EVs are set to kick in by July 4 while the bloc investigates what it says are excessive and unfair subsidies.

The European Commission said it would host technical talks with Chinese officials in Brussels this week.

"The EU side has emphasised that any negotiated outcome of the investigation must be effective in addressing the injurious subsidisation," a Commission spokesperson said.

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German Chancellor Olaf Scholz said there needed to be "serious movement and progress" from China too.

China has repeatedly called on the EU to cancel its tariffs, expressing a willingness to negotiate. Beijing does not want to be embroiled in another tariff war, still stung by U.S. tariffs on its goods imposed by the Trump administration, but says it would take all steps to protect Chinese firms should one happen.

China's Global Times, citing observers, said the best outcome would be for the EU to scrap its tariff plans before July 4.

Analysts and European trade lobby groups stressed that China would need to come to negotiations willing to make major concessions.

Alicia Garcia Herrero, senior fellow at Bruegel, an influential EU affairs think tank, doubted the planned curbs could be dropped before elections in France on June 30 and July 7.

"The Commission can't change a decision it has been pondering for months on months on months," she added. "Yes, China is putting pressure on the member states, but they would need to vote with a qualified majority against the Commission."

The European Commission is set to make a final decision on tariffs by Nov. 2 at the end of the anti-subsidy investigation.

The Chinese commerce ministry did not immediately respond to a Reuters request for comment.

TALKS ARE A 'GOOD SIGN'

Siegfried Russwurm, head of Germany's biggest industry association BDI, said it was a "good sign" both sides would hold talks.

"You know the old saying: as long as there are talks you're not shooting at each other," he told German public broadcaster Deutschlandfunk.

Russwurm, who also serves as chairman for German conglomerate and car supplier Thyssenkrupp, said tariffs were the last thing Germany needed as a major exporting nation.

At the same time, Brussels' move to apply tariffs of varying degrees suggested a thorough analysis had taken place and that this was not an effort that targeted the entire Chinese car sector in equal measure.

Meantime, Maximilian Butek, executive director at the German Chamber of Commerce in China, said there was "zero chance" the preliminary tariffs would be removed by July 4 unless China eliminated all the issues flagged by the European Commission.

EU trade policy has turned increasingly protective over concerns that China's production-focused development model could see it flooded with cheap goods as Chinese firms look to step up exports amid weak domestic demand.

China has rejected accusations of unfair subsidies or that it has an overcapacity problem, saying the development of its EV industry has been the result of advantages in technology, market and industry supply chains.

"When European Commission President Von der Leyen announced she would investigate China's new energy vehicles ... I had an intuitive feeling it was not only an economic issue but also a geopolitical issue," said Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges.

ARMED AND READY

Although calling for talks, Beijing has also indicated it has retaliatory measures ready if the EU does not back down, and that it considers Brussels wholly responsible for the escalating tensions.

China has opened an anti-dumping investigation into EU pork imports. The Global Times said China was also teeing up an anti-subsidy investigation into European dairy goods and tariffs on large-engined petrol cars.

Chinese authorities have dropped hints about possible retaliatory measures through state media commentaries and interviews with industry figures.

"It seems probable that Beijing will raise tariffs up to 25% for Europe-made cars with 2.5 or above litre engines," said Jacob Gunter, lead analyst at Berlin-based China studies institute MERICS.

"Pork and dairy are already on the table for Beijing, and likely more agricultural products will be threatened," he added.

"On the EU side, there are a variety of ongoing investigations ... so we should expect some sort of measures targeting distortions on (Chinese) products ranging from medical devices to airport security scanners to steel pipes."

(Reporting by Joe Cash and Ryan Woo; Additional reporting by Laurie Chen and Christoph Steitz, Miranda Murray and Philip Blenkinsop; Editing by Gerry Doyle, Alexander Smith, Louise Heavens and Emelia Sithole-Matarise)