Week that started with WTO warning ended with trade battle
World Trade Organization in Geneva early this week was unambiguous: A global economy split into rival trading factions would reduce real incomes 5% — maybe double that amount in poor countries.
The next day, the European Union launched what some of the 27-nation bloc’s most well-known industries — ranging from Airbus SE to cosmetic producers and wine makers — worry could land them on the punishing end of a trade war with China.
Since the European Commission’s announcement Wednesday of a new anti-subsidy inquiry into Chinese electric vehicles, which might lead to duties on Made-in-China EV imports, European businesses are scrambling to assess their exposure to a potential tariff barrage between two of the world’s largest economies.
That’s because President Xi Jinping’s government has shown a determination to respond to punitive trade measures — like former US President Donald Trump’s tariffs — with its own reciprocal restrictions. The most powerful tool Beijing can wield is restricting access to its huge domestic market.
French Finance Minister Bruno Le Maire, speaking to Bloomberg Television on Friday, signaled that perhaps a new era has arrived, one where “the EU starts thinking about its own interest.”
‘Powerful Signal’
With the Chinese subsidy investigation, Brussels “wanted to send a powerful signal,” former EU Trade Commissioner Cecilia Malmstrom told Bloomberg News in an interview.
With Chinese imports flooding in — unlike in the US where 27.5% tariffs are in place — she said “there is fear of competition.”
The fretting might be justified. The auto sector accounts directly or indirectly for nearly 14 million jobs — or 6.1% of the EU workforce.
The potential impact for exporters is also huge.
