Over the weekend, Turkish authorities announced their decision to impose additional tariffs amounting to 40% on imports of cars originating from China, effective July 7th. This declaration raised eyebrows, leading many to question whether Türkiye is opening a new front in the Western manoeuvres and trade restrictions against China. If not, why was this action taken immediately after the Turkish Foreign Affairs Minister visited China?
Decoding Türkiye’s Tariffs on China
The dynamics of multilateral trade have changed dramatically as China and the US engaged in a fierce trade war, pulling other nations into their orbit. Both superpowers strive for global dominance by bolstering their domestic economies while attempting to contain each other, erecting “high fences” in no small as the US claims, but big yards.
Meanwhile, another significant player in international commerce, the EU, adopted a more balanced approach in this war, cautiously navigating the complexities of trading with China. While the EU addresses the risks associated with such trade, its focus remains on safeguarding the EU interests, preventing the flood of subsidised Chinese goods into its market, and tackling pressing issues like climate change. However, this does not preclude occasional alignment with the US in its trade war against China, particularly observed when certain EU countries echoed American pressure by restricting certain semiconductor exports to China.
Given these circumstances, some pundits could speculate that Türkiye considered aligning with the US in its trade war by imposing high tariffs on certain imports from China. However, Türkiye’s move is far from a declaration of war. Türkiye and China are significant trading partners, with trade between the parties experiencing steady growth in recent years. To further strengthen this partnership, Turkish Foreign Affairs Minister Hakan Fidan’s visit to China highlighted the importance of enhancing bilateral relations and increasing investments from China to Türkiye.
Moreover, Türkiye’s international trade policy is shaped around its national priorities rather than containing third countries like China. Accordingly, Türkiye focuses on reducing the current account deficit, restricting imports and fostering domestic manufacturing while maintaining balanced relations between the two superpowers. Thus, Ankara’s decision to impose tariffs targeting is a strategic one aimed at advancing its own economic goals rather than taking sides in the trade war.
So why did Türkiye then choose to impose tariffs right after Hakan Fidan visited China, in which both sides signalled their wish to enhance economic relations? The answer can be found within the nuances of the global trade landscape.
A Savvy Strategic Move
Looking at the global trade picture, Türkiye had no choice but to impose tariffs on car imports from China. With the car trade attracting significant attention from many countries, and their decisions having serious implications for Türkiye, the need for action was urgent to avoid being left behind.
The spotlight on the car industry is due to its significant impact on the economy, a country’s account deficit, and its strong relation to fossil fuel emissions and climate policies. Cars originating from China are particularly targeted because Chinese subsidies to the car industry and dumping practices give Chinese companies a significant advantage. This situation puts them well ahead of their non-Chinese competitors and risks flooding domestic markets with Chinese cars with lower environmental standards, threatening local companies’ stakes as well as countries’ climate targets.
Major players in the global trade arena have already delved extensively into this issue. For example, just recently, the US hiked its tariffs on Chinese electric vehicle imports from 25% to 100%. The EU, too, is expected to notify China that it will impose tariffs on electric vehicle imports this week.
In response, aside from potential retaliatory actions from China, Chinese car companies started to consider relocating their manufacturing facilities outside of China, particularly to the EU, to mitigate the negative impacts of this situation. Türkiye, amidst all these developments, could not afford to remain idle, both in terms of its domestic priorities and in navigating the evolving policies of the car industry. It had to act to ensure it secured its share of the relocation because every minute lost represented an additional burden on the Turkish economy.
The sequence of Türkiye’s diplomatic and economic actions is striking. Following a visit by the Foreign Minister to China—which hinted at warming relations—Türkiye introduced tariffs on electric vehicle imports. This strategy might seem contradictory at first glance but actually reflects Türkiye’s tactical approach to enhancing trade ties with China while pursuing its economic interests. By affirming its positive relations with China through high-level discussions before imposing tariffs, Türkiye strategically positions itself not as antagonistic but as keen on attracting Chinese investment without delay.
Potential Chinese Reactions: Win-Win or Lose-Lose
One thing is certain: China was not taken by surprise by this move, as it is already accustomed to its car industry being targeted. Reflecting on China’s previous responses to similar situations with other countries, two potential reactions emerge in response to Türkiye’s move: retaliation or cooperation.
If China can accurately assess Türkiye’s intentions and understand that, unlike US and EU practices, the goal is to prioritise domestic priorities and attract investments, choosing the path of cooperation is more likely. In doing so, Chinese companies may relocate their production to Türkiye instead of losing an important market.
This strategy would not only facilitate China’s access to the European market but also offer substantial benefits to Türkiye in terms of foreign investment and technology transfer. Additionally, Türkiye’s proximity to the EU and its membership in the EU Customs Union provide further incentives for such cooperation. The ball is now in Beijing’s court to reach a win-win situation for both nations.