According to analysts at the European Central Bank, the ongoing trade war between the United States and China could actually help tame inflation in Europe. While this may seem like an unusual claim, ECB experts see potential benefits. Such a scenario may not be far-fetched.
The bank's economists argue that if China redirects its exports from the US to Europe, heightened competition could drive prices down across the euro area. This trend would be supported by a weaker yuan, which would make Chinese goods cheaper and more attractive to European importers.
ECB analysts say that cheaper imported products could help slow price growth, particularly in non-food consumer goods. The anticipated decline could shave 0.5 percentage points off inflation in this sector, with overall inflation falling by 0.15 percentage points. "First, the composition of Chinese exports to the United States and to the euro area is similar, making the euro area a natural alternative. Second, established supply chain links, which have expanded since the last China-US trade war, and ongoing industrial upgrades in China facilitate the redirection of trade flows," the ECB notes.
The sectors most likely to feel the impact are clothing, electronics, and furniture. In addition, rising Chinese imports through online marketplaces are expected to put further pressure on prices.
Earlier, Chinese Foreign Ministry spokesperson Guo Jiakun responded to US threats of secondary sanctions over Russian oil purchases by reaffirming China's commitment to its own energy security. "China will take reasonable energy safeguard measures according to its own national interest. There are no winners in a tariff war, and coercion and pressure will not solve problems," the official added.
