German Economists Divided on Car Tariffs for China

German economists are divided on the planned EU tariffs on cars from China. 33 percent of the participants in the ifo Economists Panel consider the EU’s planned countervailing duties just right for counteracting the Chinese government’s subsidies. 11 percent want lower tariffs, six percent want higher. At the same time, 33 percent of the professors think that no countervailing duties would be appropriate. Above all, they cite the risk of an impending trade war. They argue that tariffs would not eliminate the dominance of Chinese electric cars, and that European manufacturers would not become more efficient as a result of tariffs. “Dealing with China is challenging. Geopolitical risks, responses to China’s economic and export strategy, and maintaining free trade must be weighed against each other,” says Niklas Potrafke, Director of the ifo Center for Public Finance. 

At the same time, 34 percent of participants say they are in favor of EU subsidies for future industries in order to reduce dependence on China, while 53 percent reject that. For them, the People’s Republic of China is at the same time a partner, an economic competitor, a systemic rival, and a geopolitical adversary. In that order. 65 percent of participants see China as a partner, 59 percent see it as an economic competitor or systemic rival, and 51 percent select “geopolitical adversary”. 

When asked about the dependence of German foreign trade on China, 88 percent of professors find it to be high or very high. The reverse does not apply: Only 13 percent think that China is highly or very highly dependent on Germany. When asked how dependent the EU is on China, the balance shifts somewhat: 63 percent see the EU as highly or very highly dependent on China. And China, conversely, is 29 percent highly or very highly dependent on the EU. 72 percent of respondents see a high or very high risk of the Chinese government exploiting the economic dependence in the next five years to push through foreign policy objectives vis-à-vis Germany. Over the next ten years, the risk for them will even rise to 80 percent.

Consequently, 69 percent are in favor of a strategy of de-risking, in other words, intensifying the search for sources of supply and markets other than China. Only 7 percent want complete economic decoupling. Around 15 percent consider no restrictions at all in entrepreneurial decisions to be the best approach. Only two percent are in favor of more intensive trade with China.

162 economics professors took part in the survey.