Germany signals China EVs probe will have high burden of proof

Germany expressed its support for the European Union's anti-subsidy probe into Chinese electric vehicles while making it clear that the burden of proof will be "very high" if the investigation is to lead to concrete action.

"It's very natural that if we are embracing the key elements of free trade, we all have to play by the rules," Joerg Kukies, Chancellor Olaf Scholz's chief economic adviser, said Friday at an Atlantic Council forum in Berlin.

The EU's move is "perfectly normal" and the bloc is justified in looking into whether there are "undue subsidies," he added during a discussion moderated by Bloomberg's Stephanie Flanders. At the same time, he said the "threshold of proof and evidence is very high."

China reacted angrily to the European Commission's announcement this month that it will investigate the subsidies, calling it "a naked act of protectionism" and stoking concerns about a potential tariff war.

The EU's trade chief, Valdis Dombrovskis, will seek to smooth relations when he makes a four-day trip to China starting Friday, according to people familiar with his plans.

U.S. Inflation Reduction Act

In Friday's discussion, Kukies, a former deputy German finance minister who worked for Goldman Sachs Group, also addressed the U.S. Inflation Reduction Act, a $370 billion package to support American businesses in the transition to a low-carbon economy.

Europe "shouldn't be too nervous" about the plan because governments have the "fiscal power and the fiscal willingness" to match its scope, he said, citing investment in decarbonization earmarked for next year by Scholz's ruling coalition worth €112 billion ($119 billion).

"So this is pretty similar to what in principle the U.S. is doing with the Inflation Reduction Act," Kukies said.

South America trade deal

Turning back to trade policy, Kukies said that Scholz is keen to finalise an agreement between the EU and the MERCOSUR bloc in South America by the end of the year.

The chancellor discussed the remaining hurdles to a deal during talks with Brazilian President Luiz Inacio Lula da Silva in New York this week, Kukies added.

"We already moved ahead on Canada, we moved ahead with Kenya, we're moving ahead with Mexico, Australia, New Zealand,” he said. “All those things are extremely positive."