Stephane Sejourne, Vice-President of the European Commission, late said that the EU could become a "side-to-side victim" of the economical exchange of blows between America and China.
Europe landfilling inexpensive Chinese goods
A survey by 2 trade experts shows what can truly happen.
Sejourne warned that if Trump imposed fresh duties (What he yet did), there is simply a hazard of overcapacity in China which will then scope Europe.
Sounds logical. All those Chinese vacuum cleaners will should be sold somewhere if the Americans don't want them anymore.
This script is challenged by any economists. From a survey conducted by trade experts Simon J. Evenett and Fernando Martin, who carry out investigation in Switzerland and the US, even a drastic increase in US duties is improbable to lead to a flood of inexpensive Chinese products in Europe.
They mention to Trump's first customs dispute with China 7 years ago. Economists challenge the thought of European dignitaries that Trump's actions against China will be a problem for the EU.
Conclusion of the First Trade War
From 2018 to 2021 Trump imposed duties on Chinese goods worth about 370 billion dollars (about 1.5 trillion PLN). These included machines, textiles, furniture, and food. Trump wanted to make import more costly and thus give American companies an advantage. But his calculations didn't work. By the end of his first tenure, imports from China did not fall, but increased by around $40 billion (more than PLN 160 billion) to over $500 billion (over PLN 2 trillion).
And what were the consequences of all this on the another side of the Atlantic? According to Evenett and Martin, the flow of goods moved from America towards Europe. WAccording to economists, Trump's work led to an increase of Chinese exports to the EU by 15 billion dollars (about PLN 61 billion). So any Chinese companies actually redirected their products to Europe.
However, at the same time any Chinese companies withdrew from exports to Europe. As Evenett and Martin explain, they were able to sale little in the USA due to US duties which increased their production costs. abruptly they were in a disadvantage compared to German, French or Italian companies. This phenomenon consequently reduced Chinese exports to Europe by about 12 billion dollars (near PLN 49 billion).
"However, this does not mean that Europe does not gotta worry"
So was Europe flooded with inexpensive vacuum cleaners, pans and washing machines during Trump's first trade war? I don't think so. In the end, the EU received additional products from China worth $3 billion (over PLN 12 billion). It's a tiny sum in trade between 2 regions of the world. In 2023, exports from the People's Republic of China to the EU amounted to little than EUR 515 billion (almost PLN 2 trillion 100 billion).
Evenett and Martín conclude that Europe has not become a "side offering" in the past trade war between America and China. The flood of inexpensive goods produced in China did not materialise. Economists anticipate Another trade war between Donald Trump and Xi Jinping It will besides not have besides bad consequences for Europe.
However, this does not mean that Europe does not gotta worry. any sectors are at hazard of suffering from Chinese overcapacity — regardless of Trump’s decision. The automotive industry, for example. 5 years ago, China was not yet a net exporter of vehicles. According to an analysis by the British think tank Centre for European improvement (CER), present the country imports 5 million more cars than it exports.
"China's car subsidies pose a peculiar threat"
According to the European Commission (EC) The People's Republic of China is heavy subsidizing its car manufacturers, giving them an unfair advantage in planet markets. The EC has so late imposed higher duties on Chinese electrical vehicles. The Commission may impose further duties on wind turbines and solar cells.
So there is simply a difference compared to the time of the first trade war between America and China — government support in Beijing for the home manufacture is increasing. According to OECD studies, it is now 3 to 4 times higher than in the EU.
Chinese car subsidies pose a peculiar threat, especially to Germany.
“German companies will find it hard to compete with state-funded Chinese companies. And if German producers deficiency profits to finance fresh investments, there is simply a hazard that they will fall behind in technology, says economist think tank Centre for European improvement (CER) Sander Tordoir.
Chinese companies are so trying to flood the planet with inexpensive products. And the government in Beijing supports them with advanced subsidies. The good news, however, is that the possible duties of Donald Trump on the People's Republic will not make the situation worse.
