【By Liu Bai, Observer】Faced with the growth of China's industries, the US and Western countries have continuously strengthened protectionist measures, taking a historical step backward. A report by the Financial Times on November 6 focused on Germany, which has deviated from its traditional free trade path.

The report mentioned that German Chancellor Merkel has declared the intention to raise tariffs on Chinese steel to protect domestic industries in distress, marking a complete 180-degree turn from her previous stance when she was in opposition, opposing EU tariff increases against China. The chancellor admitted that this protectionist position is different from what Germany previously considered correct, but insisted that today is different from the past, and it is necessary to protect its market and manufacturers.

Since September, there have been continuous reports that the EU plans to follow the US and Canada in imposing tariffs on imported steel. Media generally interpreted this move as "clearly targeting China."

This measure received support from Merkel. After a meeting at the Chancellery with representatives of the steel industry, she stated that it is necessary to protect the struggling steel industry through measures such as increasing tariffs, reducing quotas, and preferential procurement.

The Financial Times directly pointed out that Merkel's support for protectionist measures to maintain the domestic steel industry forms a sharp contrast with Germany's traditional commitment to free trade.

Merkel told industry representatives that the European Commission's proposal to increase steel import tariffs and reduce duty-free quotas was "on the right track."

She also supported taxing imports from countries that do not adopt the same carbon dioxide emission standards as the EU, and expressed a preference for incentives to encourage companies to purchase steel produced within the EU.

Eisenhüttenstadt, Brandenburg, Germany - Blast furnace of ArcelorMittal steel plant IC Photo

Merkel admitted that this stance "is different from what we used to consider correct," and added that in the past, the market was open, competition was fairer, and the US had not yet implemented tariff policies.

"Unfortunately, that era is gone, so we must protect our market and our manufacturers," she said.

Merkel also said she is seeking clarity from the European Commission on whether her government will be allowed to provide electricity price subsidies to energy-intensive enterprises starting next year.

Her coalition government plans to lower electricity prices for about 3,000 companies (electricity prices in Germany are high in Europe), mainly concentrated in the chemical and plastics industries. The government also plans to include steel companies in this list or seek increased quotas for existing energy assistance for the industry.

The European Commission said it is engaging in "constructive dialogue" with Germany on the electricity price subsidy plan, aiming to find an "appropriate solution that complies with EU rules."

Analysts point out that Germany was once a firm defender of free trade, but earlier this year, the US imposed tariffs on EU goods, causing significant damage. Previously, the German economy had stagnated for three years, and this further exacerbated its economic difficulties.

Especially German steelmakers like Thyssenkrupp and manufacturers using steel components were hit by a 50% tariff. Germany is currently the largest steel producer in the EU.

At the same time, the Trump administration's imposition of import taxes on China and other countries led to a large influx of cheap steel into the EU, originally destined for the US market.

Karsten Bräuer, global macro strategist at ING, said Merkel's stance is a "remarkable" 180-degree turn.

"Especially considering that as a leader of the opposition, he previously opposed EU tariffs on China and any form of trade protectionism. This indicates that he completely underestimated the country's severe economic situation."

Holger Schmieding, chief economist at Berenberg Bank, said Merkel's statement marks an "explicit shift" and "a certain degree of trade protectionism." "But it also reflects geopolitical realities. Europe needs to maintain steel production capacity to avoid relying on potentially unreliable foreign suppliers. Even advanced weapons cannot do without steel."

In 2024, EU steel companies announced 18,000 job cuts, and since 2008, the industry has cut 90,000 jobs in total. Thyssenkrupp has planned to lay off 11,000 workers at its Duisburg plant in the Ruhr industrial region, accounting for 40% of the plant's total staff.

However, imposing higher tariffs on steel imports could indirectly harm equipment manufacturers and car manufacturers, who are also facing the dual squeeze of US tariffs and competition from Chinese products.

The German Association of the Automotive Industry (VDA) stated that although "a certain level of protection may be reasonable," the European Commission's proposed "extremely broad additional measures" could "add extra pressure to the supply chain."

German government officials said the government believes the rise in steel component costs is manageable.

The industry is concerned that imposing higher tariffs on Chinese steel could further deteriorate already tense Sino-German relations. Last month, due to escalating tensions over issues such as rare earth export controls, German Foreign Minister Annalena Baerbock temporarily canceled her scheduled visit to China.

Regarding Sino-European relations, China has consistently emphasized that China's development and openness bring opportunities, not risks, to Europe and the world. Protectionism cannot solve the EU's problems; it protects the backward and loses the future. China and Europe are each other's second-largest trading partners and important forces in building an open world economy. They should resolve specific trade and economic issues through dialogue and consultation.

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