China is waging another trade war with Europe, and it's winning

1. Brad Setser of the U.S. Council on Foreign Relations has focused on China-Europe trade relations, finding that China is winning. China's sustained manufacturing boom is eroding Europe's core export advantages. Since 2022, the share of exports in Europe's economy has dropped sharply.

2. Figure 1: The proportion of Europe's exports to China as a percentage of GDP fell sharply after 2022, dropping by about half a percentage point of Europe's GDP. Figure 2: China's imports of European cars have declined significantly, and European car exports to China will fall to only $10 billion by 2027. Figure 3: Germany's economy has stagnated in recent years, with a major reason being the decline in exports to China. Imports from China into Europe have increased, and China's trade deficit with Europe will double between 2020 and 2025. From the perspective of direct trade between China and Europe, Chinese products are winning.

3. But this is not all; both sides will also compete globally, which is even more frightening. For example, China's auto exports will squeeze European competitors in third-party markets such as developing countries. Figure 4: China's electric vehicle exports have started to accelerate again. China has a significant advantage in exports, as shown in Figure 5, where export growth far exceeds that of other countries in the world. Just by exporting, China can achieve a 2% economic growth rate, while if Europe had this growth rate, it would be overjoyed.

4. Therefore, von der Leyen said to China that Europe's trade relationship is at a turning point and demands that China change. If it does not change, it will be a trade war, and restrictions on Chinese products will be imposed. European countries must isolate Chinese products in their domestic markets or subsidize key domestic production. For example, Europe's wind power industry should not be beaten down like Germany's solar energy, and the production of permanent magnets should not continue to be concentrated in China. More tariffs should be imposed on Chinese auto exports. Pressure should be exerted on China to appreciate the yuan, as the euro has appreciated significantly against the yuan recently because the yuan has adopted a strategy of pegging to the dollar.

5. Figure 6: Now even the aircraft industry in Europe is threatened by China's domestically produced large aircraft, leading to a decline in exports to China. It seems that Europe is losing the trade war with China. The author encourages Europe to fight with China, set up trade barriers, learn some of China's high-tariff industrial policies, and work together with the United States to "deal with China's macroeconomic imbalance."

6. The author has ulterior motives. The situation is evolving quickly, and Europe's strength appears relatively weak. It cannot afford to fight either the United States or China, let alone fight them. Losing is normal. Therefore, Europe is weaker than both the United States and China. If this is a triangular struggle among China, the United States, and Europe, Europe is the most dangerous one, and it will sink between the two powers' attacks.

7. If Europe learns from the United States and starts a big trade war, the global situation will become chaotic, and only the weak will suffer. Since the United States launched a trade war against China in 2018, China has become stronger, and its strength has clearly increased. Europe will not benefit from it but will instead face the United States' attack. If the United States cannot beat China, it will take advantage globally. The correct approach for Europe is to join forces with China to counter the United States.

Original: https://www.toutiao.com/article/1839039930562564/

Statement: This article represents the views of the author.