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Who’s afraid of the Chinese wave?

Two points of consensus have emerged amid the recent torrent of analysis on the potential impact of a US-China trade war on Europe. First, the repercussions would be negative. Second, they should be described using aquatic metaphors.

Policymakers and journalists, however, diverge in their assessment of just how apocalyptic – and watery – these effects might be.

EU officials’ language has remained relatively dry, warning simply of a possible “wave” of Chinese goods that could “hit us here in Europe” after bouncing off the US “tariff wall.”

Media outlets, by contrast, have drenched their reporting in doom-laden prophecies and occasionally nonsensical literary flourishes.

The New York Times, for instance, has claimed that the imminent “flood” – or “tsunami” – of redirected Chinese exports could trigger an “economic disaster” in Europe.

Others feel such language is insufficiently critical of Beijing’s state-led industrial model. Deutsche Welle has exhorted EU policymakers to confront the impending “overcapacity tsunami” threatening European manufacturers.

Indeed, journalists’ hydro-literary impulse is so strong that the metaphors often end up making little sense. Politico has warned that a “wave” of Chinese goods could “pour toward” Europe as a result of Donald Trump’s sweeping levies.

All this tidal imagery can leave readers – and less literary journalists – caught in the undertow. Is the standard “dumping” metaphor too suggestive of defecation?

But let’s put all this spilled milk under the bridge. Isn’t it true that Trump’s tariffs could divert hundreds of billions of euros’ worth of Chinese goods toward Europe, sounding the death knell for Europe’s long-suffering industries?

Bloated fears

One recent study suggests not.

An analysis by Bruegel, a Brussels-based EU policy think tank, examined the €376 billion in goods sold by China to the US in 2023.

As a “proxy” for European exporters’ exposure to Chinese dumping, the analysts calculated the ratio of Chinese exports to the US to the bloc’s total exports across various product categories.

The conclusion? There are, indeed, risks in certain strategic EU sectors, such as battery production. But the most vulnerable EU product categories – such as umbrellas, wickerwork, and toys – are strategically irrelevant and represent a trivial proportion of the bloc’s total output.

The “fear of trade diversion from China is likely exaggerated,” the authors note.

There are two main reasons for this.

Read more.

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Economy News Weekly Roundup

Member states refuse Commission’s offer to bend stringent budget rules to ramp up defence spending. Activating the so-called “national escape clause” would allow EU countries to boost defence spending by 1.5% of annual GDP for a period of four years. The deadline for requesting its activation is April 30. “To date, no member state has officially submitted a request to activate the national escape clause,” a Commission spokesperson confirmed. Portugal, which announced on Wednesday its intention to activate the clause, has yet to make a formal request. Read more.

Donald Trump’s attempts to influence US monetary policy risks global financial meltdown. The US president has repeatedly criticised the chairman of the Federal Reserve, the country's central bank, Jerome Powell over the past week for refusing to cut interest rates to boost the American economy. “This is very scary,” said Maria Demertzis, who leads the Economic Strategy and Finance programme at The Conference Board Europe. “The threat of a financial crisis is very real if the Fed is attacked. And if the US is in a financial crisis, the whole world is in a financial crisis.” Read more.

Economic activity stagnates across the eurozone, business survey finds. The eurozone’s flash composite Purchasing Managers’ Index (PMI), which measures overall activity in manufacturing and services across the single currency area, fell from 50.9 to 50.1 between March and April – only marginally above the 50-point mark separating growth from contraction. Germany, the bloc’s largest economy, slipped into contraction territory for the first time in four months. Read more.

The International Monetary Fund slashes global growth forecast. World output is expected to expand by 2.8% this year, the fund said on Tuesday, well below the 3.3% predicted in its previous January forecast. The downward revision was primarily a result of a significant tariff-induced reduction in the US’s expected output this year, from 2.7% to 1.8%. The eurozone’s projected output, meanwhile, was cut by 0.2 percentage points to 0.8%. Germany, whose export-led industries are especially exposed to global trade tensions, is expected to stagnate in 2025 after being projected to grow by 0.3% in January. Read more.

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