LIVE MARKETS-Trump’s China trip could have consequences for Europe

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TRUMP'S CHINA TRIP COULD HAVE CONSEQUENCES FOR EUROPE

Europe isn’t top of the agenda for the meeting between U.S. President Donald Trump and Chinese President Xi Jinping this week.

But, “its outcome matters directly for Europe,” Andreas Rees, chief German economist at UniCredit, said in a note.

“If the US-China trade truce holds, high US tariffs on Chinese goods may lead to a “controlled” redirection of Chinese exports from the US towards the European market,” Rees said.

“If the truce breaks down (sooner or later), China may have even stronger incentives to dump excess production into Europe, while using export controls on rare earths and critical minerals as leverage.”

That all comes as Europe-China trade relations are also in a tricky spot.

Rees notes that, while the U.S. has sharply cut back on Chinese imports, China remains a top source for EU imports. And there isn’t necessarily an easy way out either as key European issues – ranging from growth to decarbonisation – are linked to China in one way or another.

“This creates the European dilemma: de-risking is strategically necessary but economically costly, especially in a low-growth environment. Not de-risking is cheaper today but could prove much more costly tomorrow.”

(Sophie Kiderlin)

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