Chinese Yuan: Trade war risk rises on EU-China tensions – Commerzbank

Volkmar Baur at Commerzbank highlights China’s new anti-dumping probe into EU nitrotoluenes as likely linked to broader trade frictions. A Franco-German non-paper urges tougher EU action on dumping, subsidies and currency manipulation ahead of Trade Commissioner Sefcovic’s China trip. Failure to deliver concrete measures to address imbalances could trigger an EU-China trade war with significant currency implications.

EU-China imbalances threaten currencies

"When Sefcovic met with his Chinese counterpart Wang Wentao in late June, they agreed to find a solution by October to the growing trade imbalance between the EU and China. The non-paper by Macron and Merz now signals that this time it should not stop at mere rhetoric, but that concrete measures are needed. If this does not happen, there is a risk of a trade war between China and the EU, which could have significant implications for currencies."

"There is a great deal at stake for both regions. China is a key supplier to Germany and the European Union. A whole range of intermediate goods are now virtually unavailable anywhere except from China."

"On the other hand, Europe has become an important export market for China - particularly due to the trade war with the US. In the first eight months of this year, Chinese exports to the EU rose by 15% compared to the same period last year, while the trade surplus increased by as much as 23%."

"It is likely no coincidence that this non-paper was published shortly before EU Trade Commissioner Maros Sefcovic’s trip to China and before the European Council meets again this month to discuss these issues."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)