China Trade Retaliation: Is It Just Bad PR?

Here we go! A day after the EU imposes tariffs on Chinese exports of solar panels the government there begins investigating what else? So called “wine dumping“, of course. The inevitable calamity of trade war may be upon us, but maybe it’s high time.

Mosel wines being dumped in China?

For those unfamiliar with the term, “dumping” is where a firm sells goods far below the actual market value so that the competition in that market is forced out by attrition. In the case of EU investigations into Chinese manufactured solar panels, the effects of subsidized China companies would seem apparent. Just about everyone else in the business of building panels for Europe is all but “out”, and China has garnered most of the business. The obviousness of China’s retort in launching their “wine dumping” probe is tantamount really to economic warfare for some.

China manufactures more than half the solar panels sold in the world. At one point Germany was the largest manufacturer, but slashed prices by subsidized Chinese producers basically made photovoltaic production for Europeans unprofitable. Recent politics surrounding this imbalance of trade has muddied the waters of EU-China truth, but this latest move by China is pretty foreboding if only for the immediacy of the response. What’s more, this instantaneous reaction is probably not even in China’s best interest, that is if an all out trade war is undesirable.

Back when the EU tariffs were just being discussed, some feared the response from China would lead to a “back and forth” fencing match of trade sanctions. This writer, for one, suspected no such parrying would occur simply because China has more to lose than anyone where trade wars are concerned. Evidently, the China regime is fully prepared for going backward? This Forbes report outlines the duties and other specifics that were levied on China imports for the short term. With “dumping margins as high as 112.6% found by the EU investigators though, it’s, difficult to imagine Europe backing down with non-subsidized producers crying foul.

From the PR perspective, sometimes swift retaliation is a good thing, and sometimes not so good. In this particular case China steadfastly denying the seeming obvious, then retaliating so swiftly with the seeming “less-than-obvious”, there is little equity of credibility here. China’s overall trade surplus over the last decade or so is epic. Trade partners like the US, Germany, Australia, South Africa, Brazil, and Japan prop up China’s economy with a massive inflow of revenue and incentive. Meanwhile those same revenues are reinvested in snatching up still more financial incentive worldwide. Bonds to properties of a multiplicity of type, China has profited more than any other nation on Earth comparatively since economic reforms in the 90’s were instituted, but particularly since joining the World Trade Organization.

Look at the situation from a simplistic and logical perspective here. If China’s growth were so good for EU economies, wouldn’t growth in countries like Germany match their GDP gains? The charts do not really lie in this case, China has far more to lose than the EU or any other world economic market in this fight.

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  1. Swoosh says

    Yeah, coz bailing out EU members and corporations and devaluing money aren’t considered subsidizing right? China is right to retaliate, wine is a good choice too. I expect the next one will be “luxurious” goods. Bring it on EU.

    • Phil Butler says

      @Swoosh. In the dirty business of politics and corporate business, finding the worst evildoer is pretty simple – look for who is winning. :) You are talking about the leaders, I am talking about what’s best for the people. I appreciate your view too though, and the EU has its own scoundrels too.



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