The EU, a political project conceived to remove trade barriers, has been raising tariff walls at its fastest rate in 15 years. But just as fast as the defenses are built against cheap Chinese imports, fresh storms blow the bloc off balance again. Donald Trump’s threat to impose levies of up to 60 per cent on Chinese goods would, for instance, put an even higher tariff wall around the US than anything the EU has planned.
The effect, if the US president follows through, would be to divert Chinese goods from the US to the EU — forcing Brussels to in turn consider hitting back with even tougher defensive measures. It is an impossible situation for a union that has taken pride in its free-trading instincts. Every barrier it erects can save some domestic jobs but will also reduce the competitiveness of other domestic industries by raising the price of imports. With China now accounting for 30 percent of global industrial output, the ripple effects will be considerable on EU products ranging from electric vehicles to Italian tomato paste. Vulnerable industries, such as steel and glass fiber makers, complain the EU has not been building trade defenses fast enough or high enough to save them. “We are close to a tipping point for many industries,” said Laurent Ruessmann, a partner with RB Legal and trade defense expert. On the other hand, those who want cheap Chinese inputs to keep their own product prices down, such as paint makers, have lobbied against tariff measures. The EU has put duties on titanium dioxide, a key ingredient, leaving paint makers worried they will have to absorb the cost or lose sales. Simon Evenett, professor of geopolitics and strategy at IMD Business School, said tariffs always ended up costing consumers or other businesses. “Europe’s dilemma is either to sacrifice jobs downstream by slapping tariffs on Chinese imports or watch EU producers shrink by doing nothing. When it comes to protectionism, someone’s ox always gets gored.
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