Welcome to our November edition. It will be a bit longer but, after all, it’s not often that the US election and Trade Commissioner’s hearing at the European Parliament happen in the span of 48 hours. In addition, we bring you up to speed on the duties on Chinese electric vehicles.
One Big Thing.
The recipe for trade policy: openness, security but, above all, EU-nity
Maroš Šefčovič is all but confirmed as Trade Commissioner, after he passed his parliamentary hearing on November 4. We already spoke, last month, about what his direction of travel will be, and now he reiterated it with MEPs. In a few words: keeping the EU as open and competitive as possible, while improving the defence of the EU market, whether for threats of security or unfair competition.
In main news, Šefčovič announced the goal to have the new EU Customs Authority ready in 2026 instead of 2028. This is part of the massive reform of the EU customs union, which also foresees the creation of a common EU Data Hub to improve coordination and efficiency among Member State authorities. Šefčovič hopes this legislative work will be concluded in the first half of 2025.
As a crucial point of the reform, parcels of less than €150 will no longer be exempted from duties. MEPs largely agree on the proposal, as Chinese e-commerce platforms have been benefitting from this exemption to increase exports on substandard items.
There was strong debate on Mercosur, with criticism particularly coming from French MEPs. Every time, Šefčovič stressed he will work for a fair deal and that he will always keep the Parliament in the loop. What else could have he said? Yet, he warned, while the EU is stalling, Chinese influence is growing in the region. Moreover, a space to watch for the new mandate is whether the Commission will try to separate the trade and political components of trade agreements to speed their ratification.
Access to critical raw materials was a central topic. On top of new partnerships, he proposed initiatives as joint EU purchases to improve the bloc’s negotiating power with mineral-producing countries. In music for Australia’s ears, he said that an FTA with Canberra would greatly help the bloc’s critical minerals needs.
Surprisingly, although economic security is a central part of Šefčovič’s mandate, MEPs did not pick up much on the topic. MEP Raphaël Glucksmann did not even ask about the dossier he’s going to lead on, the crucial reform of the FDI screening framework, but rather asked about Chinese competition on green industries.
To conclude, Šefčovič went safely through the four-hour grilling, as one would expect from a Commissioner with 15 years of experience. A key remark? Šefčovič’s strong calls for EU unity as fundamental for tough negotiations with third countries and when using trade defence.
Second in line.
Orange light for EU-US trade
Trump’s return to the White House certainly will be a doozy for EU-US trade relations, judging from Trump’s track record. European leaders are aware – from potential trade wars to the ongoing war in Ukraine, there is much to think about. Trump’s affinity for protectionism doesn’t bode well, despite President von der Leyen’s warm regards and incoming Trade Commissioner Šefčovič’s commitment to solving the existing trade disputes with the US.
The next four years are gearing up to bring uncertainty for European businesses. First issue: tariffs, of course. Export-oriented Germany is first on the firing line, particularly its carmakers. Although the new tariff proposals may not fully materialise, they add uncertainty to global investments.
While EU and US officials have been working to “Trump-proof” trade relations, for example, under the Trade and Technology Council, but they failed to resolve key issues. It’s hard to hope that what wasn’t fixed with Biden will be with Trump. The first test will be the dispute over steel and aluminium – as the March 2025 deadline looms, there’s a high risk that reciprocal tariffs will be re-imposed. Reaching an agreement on trade in critical raw materials – which would enable EU companies to access to some of the IRA tax credits – appears even less likely now. On top of that, Trump might even push for even higher American content requirements.
Still, the EU is better equipped for Trump this time around. A stronger trade defence toolbox includes the Anti-Coercion Regulation that lets the Commission swiftly adopt trade restrictions against any country responsible for economic coercion. Secondly, under the International Procurement Instrument, the Commission can restrict the access to the EU procurement market if a third country doesn’t reciprocate the conditions.
There’s hope of avoiding a tariff war, but this will depend on Brussels’ commitment to importing more US LNG, agriculture products and defence equipment, which protectionist EU countries would hardly appreciate. The unlikely duo of Trump and von der Leyen also have a common target: China. They both argue for more assertiveness, though there’s a caveat – potential US tariff increases on Beijing can shift the Chinese overcapacity toward European markets.
This list could go on and on to include Trump’s disdain of the WTO. However, we have another four years to get into the nitty gritty – see you at the next (inevitable) update!
Electric standoff: EU and China’s EV battle enters a new phase
The ongoing trade dispute between EU and China over duties on electric vehicle imports has escalated as both sides pursue differing approaches to support their EV industries. In October, the EU finalised its sharply higher customs duties on electric vehicles imported from China ranging from 8% to 35%. The duties took effect provisionally in July and were finalised after talks between the EU and China failed to resolve their differences.
In response, China filed a complaint at the WTO against the EU the day after the regulation’s publication in the EU Official Journal, alleging that the EU has improperly set anti-subsidy tariffs on new Chinese-made electric vehicles. The Chinese diplomatic mission to the WTO said it “strongly opposes” the measures and insisted on the commitment to supporting a global transition toward greener technology. The EU, however, is likely to challenge the move at the WTO, as it remains concerned about the impact of subsidised imports on the EU players, as well the bloc’s innovativeness and competitiveness.
Amid this raising tension, both sides have signalled a willingness to continue negotiations, with the Commission sending a delegation for intense consultations with the Chinese Ministry of Trade. A potential compromise could involve Chinese manufacturers agreeing to minimum price thresholds, which may alleviate EU concerns without heavy tariffs. Despite a round of discussions in Beijing where both spoke of some progress, the chances of a swift resolution remain slim. Meanwhile, Chinese companies like BYD and Chery are exploring local manufacturing options in Europe, which could bypass duties altogether.
Trade in practice.
Trade policy can sneak up on you in everyday life – this happened to our colleague Giuseppe, who was asked to pay an €70 euros in custom duty and VAT for clothes worth €190 that he ordered from a British company.
This is why: customs duties are charged on imports worth more than the €150 value threshold (at least until this exemption will be removed). The percentage of the duty depends on the specific product, and is indicated in the EU Combined Nomenclature.
Despite Brexit, the EU-UK Trade and Cooperation Agreement should guarantee tariff-free trade since 2021. Still, to benefit from preferential treatment, goods must meet specific rules of origin, meaning they must be made or significantly transformed in that country. In Giuseppe’s case, the clothes were made in Vietnam, resulting in unexpected extra costs due to a 12% customs duty and VAT, which is always charged on goods imported from third countries (plus €30 charged by the courier as custom clearance fees).
Incidentally, rules of origin were at the centre of a long negotiation between the EU and UK over trade in electric cars. Eventually, the parties avoided the introduction of tariffs, even though EU and British EVs largely use Chinese batteries, by agreeing on the extension of the existing rules of origin.
Stay informed on trade rules to avoid surprises and make every purchase count – and if you have a similar story, send it our way.
Over on X:
Šefčovič is going for triple Ds: driving the EU’s competitiveness, defending EU business and deepening the EU’s economic alliances.
On our radar.
18 Nov | INTA committee hearing, including a fourth annual report on FDI screening – you can see us there.
19 Nov | Online policy roundtable discussing the outcomes of US election for Europe, including on Ukraine, Russia, China, the Middle East, climate change, trade and defence.
19 Nov | Bordelex is organising a discussion on the role of trade in EU’s international security.
20 Nov | TradeExperettes, Women in Trade, and OWIT are organising an informal networking drink.
21 Nov | Friends of Europe is organising Europe-China Forum ahead of next year’s 50th anniversary of EU-China diplomatic relations.
What we’re reading.
As the EU is working to change the regulatory framework, the latest DG TRADE report on the screening of FDIs in the bloc is even more important. The Commission reassures that, in 2023, most transactions were scrutinised within 15 days. The few that required in-depth assessment were in critical technologies, especially defence. However, many companies are worried that the proposed new rules, broadening the screening to new sectors, will increase red tape and slow down transactions.
Still have questions? Drop a message.
Contact us if you would like to hear more about our trade expertise – info@secnewgate.eu or a.pilati@secnewate.eu.
Keep up to date with the latest trade news in town and subscribe to our newsletter.