EU must avoid ‘disaster’ of decoupling amid China tariffs

EU must avoid ‘disaster’ of decoupling amid China tariffs

The European Union must avoid a damaging decoupling of global trade as it considers tariffs on Chinese electric vehicles and other goods, the bloc’s economic chief said on Wednesday.

“I think as far as Europe is concerned, we need a more mature attitude in our trade to secure our economy … especially towards China,” EU Economic Commissioner Paolo Gentiloni told CNBC’s Silvia Amaro.

Gentiloni said the EU’s ongoing anti-subsidy investigations covering the electric vehicle and wind turbine markets address concerns that China is flooding global markets with green energy products.

These investigations are a way to understand whether the subsidies that the Chinese government gives to domestic companies “damage any opportunity for European companies,” Gentiloni said.

“But that doesn’t get us to a theory of world trade decoupling that would be a catastrophe for both parts of the decoupling,” he said.

“The characteristic of the EU economy is to be more open, more influenced by trade and less just by internal consumption. For this reason, the economic reason, it is in the interest of the European Union to keep the doors of trade open.”

The United States on Tuesday announced steep tariff increases on $18 billion worth of Chinese imports, including electric vehicles and the lithium-ion batteries used in them, solar cells, steel and aluminum.

China argues that its electric vehicle market is growing because of innovation, not government subsidies, and says the U.S. Inflation Reduction Act — which has also raised protectionism concerns among EU officials including Gentolioni — subsidizes U.S. production.

Meanwhile, several EU countries are concerned about possible Chinese trade retaliation hitting key domestic industries, from the German car industry to French cognac.

This comes as the bloc aims to recover from years of sluggish economic growth and a mild recession in the second half of 2023.

Gentiloni on Wednesday expressed optimism about the outlook for the year, which he said followed a “very, very difficult 2023” marked by economic stagnation, increased savings and uncertainty caused by the ongoing war between Russia and Ukraine.

“Gradually activity is accelerating and the main driver will be private consumption. At the same time, we have two other factors that are very positive,” he told CNBC.

“Inflation is actually going down. And employment is still high, very high, it will continue to increase in the coming months.”

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2024-05-15 13:05:16