The European Central Bank (ECB) believes that redirecting Chinese exports to Europe could significantly impact inflation in the region.
Redirecting Chinese Exports to the EU
The ECB pointed out that if US-China trade talks fail and high tariffs similar to Trump's 135% are imposed, surplus Chinese goods might be redirected to the Eurozone market. This is expected to increase imports from China to the Eurozone by 10%, resulting in a surplus of goods equivalent to 1.3% of total consumption.
Impact on Consumer Prices
The ECB forecasts that diverting Chinese products could reduce inflation in the Eurozone by 0.15% by 2026. However, it may take up to a year and a half for consumer prices to decline following the initial shock. Inflation on non-energy industrial goods could also drop by up to 0.5 percentage points in 2026.
Role of the US and China in Trade Relations
US Treasury Secretary Scott Bessent noted that the final decision on trade deals with China rests with President Trump. Tensions between the two countries are affecting global economics. A leading Chinese trade negotiator emphasizes the need for stable trade relations between the nations.
Redirecting Chinese exports to Europe may significantly impact inflation in the Eurozone, but the market will require time to adapt.
