China Threatens to Withdraw Investments and Shift Orders to Russia Amid Tariff Tensions, Pressuring EU

Preface:

The European Union's recent move to impose tariffs on Chinese electric vehicles has sparked global economic attention. This is not just a competition in the automotive industry, but also a complex economic game between China and Europe.

The rise of China's electric vehicle industry has been rapid, and whether the EU's countermeasures will be effective is uncertain. More importantly, if China withdraws its investments and shifts cooperation to Russia, whether the EU can withstand the series of chain reactions is a critical question.

1. The Dilemma of the EU's Tariff Decision

The EU's decision to impose tariffs on Chinese electric vehicles seems like a self-inflicted headache in search of a bitter remedy. Simply put, European car manufacturers are being outcompeted by Chinese electric vehicles, especially brands like BYD and NIO, which not only have strong technology but also offer prices that are very "down-to-earth," directly taking market share from Mercedes-Benz, BMW, and Volkswagen. The EU hopes to use tariffs to prop up a "protective umbrella" for its own brands, but this umbrella may not shield from the rain and could instead leave them drenched.

This decision has presented the EU with a classic "left hand, right hand" dilemma. On the left hand is the necessity to protect its domestic automotive industry, while on the right hand is the significant economic dependence under globalization. European car manufacturers are not just dependent on their local markets; their market share and production chains in China are equally important.

Brands like BMW and Mercedes-Benz have set up factories in China and are making a fortune. Once tariffs are imposed, China will not sit idly by; countermeasures will come swiftly. At that point, these car manufacturers will face obstacles in the European market and may also lose favor in China, truly putting them in a difficult position.

Speaking of this, it is impossible not to mention the "divided voices" within the EU. Countries like Germany and Hungary have long been dissatisfied with the policy of imposing tariffs. Germany's automotive industry is highly globalized, and its dependence on the Chinese market is self-evident.

As a result, some countries, such as Italy, are more supportive of this "self-preservation" approach because their manufacturing industry is not very resilient to the impact of globalization. By implementing more trade protection measures, they can preserve the livelihood of some domestic enterprises. It's like a family fight; one is thinking about increasing income, while the other only wants to plug the leaky holes, resulting in a chaotic scene with everyone having their own reasons.The internal disputes within the European Union will not cease, with the divergence between Germany and Italy growing increasingly significant. Should China begin to retaliate, the days for European car manufacturers will become even more challenging. This is merely the beginning; China's subsequent responses will be more than just "withdrawing investments."

2. The Global Rise of Chinese Electric Vehicles and the EU's Response

In recent years, the explosive growth of China's electric vehicle market has placed immense "pressure" on European car manufacturers. In 2022, the export volume of Chinese electric vehicles soared to an astonishing 6.8 million units, several times higher than in 2018, effectively demoting the "big brother" image of Western brands to "second place."

Whether it's a heavyweight like BYD or an emerging star like NIO, they have both performed like they're on a winning streak, boasting not only robust technology but also affordable prices, successfully garnering a following in the European market. No matter how formidable the established European car manufacturers are, when faced with such "price butchers," they can only lament: they simply cannot compete.

So, why are Chinese electric vehicles so formidable? Firstly, China possesses the most comprehensive supply chain globally, capable of producing almost all electric vehicle components domestically. Coupled with substantial government subsidies and policy support, companies are naturally able to "show off their muscles."

In 2023 alone, BYD's sales exceeded 1.3 million units, securing the title of the world's best-selling electric vehicle brand. European car manufacturers, on the other hand, not only face high production costs but also have to contend with stringent internal environmental regulations, no wonder they are at a loss in the face of the rise of Chinese electric vehicles. Even European consumers understand: Chinese cars are not only cheaper but also packed with "black technology," making it difficult for European brands to compete.

Faced with this situation, the EU's response appears "upright and righteous," but in reality, it is filled with a "defensive mentality." The logic behind their increased tariffs is nothing more than hoping to give their own car manufacturers some breathing room, as the strong entry of Chinese cars has left European manufacturers complaining bitterly.

Once tariffs are increased, the cost of imports rises, and the price advantage of Chinese cars will be weakened, potentially allowing European brands to sell a few more vehicles. However, this calculation is not well thought out, as European car manufacturers also rely on the global market, and increased taxes may ultimately "backfire."

This "tariff war" has only just begun, but it is already foreseeable that the subsequent economic game will become increasingly intense. China will undoubtedly take action, and European car manufacturers, especially the giants that have invested in China, may not be able to "sit idly by."

3. China's Retaliation and Russia's Strategic ChoicesThe European Union imposes tariffs, and China immediately "has something to say." Because China is not a player who sits idly by; it directly plays the "divestment" trump card. If the EU stands firm, China has said, we will withdraw, and the investment will not be made!

For example, China's investment in the European electric vehicle sector has already approached $20 billion in 2023. It should be noted that this is not a small sum. European car manufacturers who rely on the Chinese market and capital will tremble at the knees when they hear this.

Of course, this is not the end. The real big move is coming: turning to Russia. Sino-Russian economic relations have been in a "honeymoon period" in recent years, especially after the West imposed sanctions on Russia. Russia is eager to have a partner like China. Once China shifts its investments and orders to Russia, Europe's days will really be tough.

Imagine China's electric vehicle technology combined with Russia's market and resources, directly forming a new cooperation chain. At that time, Europe will not only lose Chinese orders but also have to watch helplessly as China and Russia have a great time in their "backyard."

What's more interesting is that China is not willing to lag behind in other areas. For example, it "takes action" against French brandy - implementing anti-dumping measures. This move instantly confuses the French wine industry. It should be noted that the annual export share of French brandy to China is stable.

In this way, China's counterattack is not only limited to the electric vehicle sector but also "hits where it hurts." French brandy is just the beginning, and other European industries that rely on the Chinese market may also have to be cautious. China is gradually causing trouble for the EU through a series of economic "combination punches."

What's next? The EU has to face increasingly thorny economic chain reactions. The game with China affects not only the automotive industry but also the entire economic system may be shaken.

4. Sino-European game and the reshuffling of the global pattern

Now the question arises: who can laugh last between the EU and China? The EU imposes tariffs to let its own car manufacturers catch their breath; China withdraws investment and "shoulders with Russia," and it seems that it does not intend to give in easily. This game has extended from trade to the reshuffling of the global economic pattern. The future Sino-European economic and trade relations are destined to be bumpy.

Looking at the EU first, facing the pressure of the global market, internal disputes are still ongoing. Industrial giants like Germany are very anxious, especially car manufacturers who rely on the Chinese market are restless. After all, once China, the "golden father," withdraws investment, it will not only hurt European car manufacturers but also a large number of related industry chain suppliers.Furthermore, European car manufacturers have already encountered a bottleneck in their global market competitiveness. Faced with the fierce competition from Chinese car manufacturers, relying on tariff protection is akin to "a drop in the ocean." Such a result not only puts pressure on European manufacturing but also makes the EU appear more passive at the global trade table.

Looking at China, although turning to Russia in the short term is a temporary remedy, in the long run, China's goal is clearly not limited to the Russian market. Europe and America remain important markets for China's electric vehicle industry, and China will not easily give up these large markets when dealing with the blockade of European and American markets.

Car manufacturers like BYD and NIO obviously hope to continue to seize the leading position in the global electric vehicle field through technological innovation and cost advantages. And the future strategy may be more flexible and changeable: it is necessary to maintain cooperation with Europe and America while expanding into new markets.

Therefore, the future relationship between China and Europe may take two paths: either the EU continues to stubbornly "hold on" at the cost of intensifying internal contradictions in Europe and weakening global competitiveness; or both sides shake hands and make peace, finding some kind of balance to avoid a full-scale conflict.

As the relationship between China and Europe becomes more complex, this reshuffling of the global economic pattern will not only be a competition in the automotive industry but also a reorganization of the global industrial chain and supply chain.

Conclusion:

This tariff dispute is not a simple trade friction but an economic and political game between China and Europe. With the potential withdrawal of Chinese investment and the deepening of Sino-Russian cooperation, the division within the EU and the uncertainty of the global supply chain are intensifying, and the future economic pattern may be reshuffled.