(Bloomberg) If the U.S. imposes new tariffs and starts a trade war, China could start selling its products to Europe at a discount, according to Claas Knott, a member of the European Central Bank’s board of directors. It is said that there is.
In such a situation, “China could start offering its goods in Europe at increasingly lower prices,” Nott said in an interview published in Dutch newspaper Volkskrant on Monday.
“We’re already seeing that happening in the steel market,” he said. “In this way, China is exporting deflation to us, so to speak.”
Policymakers around the world are eyeing the possibility of the United States imposing trade taxes when Donald Trump returns to the White House in January. The next U.S. president has vowed to impose tariffs on other countries, with China at the forefront.
Earlier this month, ECB Vice President Luis Deguindos said the trade war caused by new US tariffs would weigh heavily on economic expansion.
“If a trade war were to break out, it would be extremely negative for the global economy, especially for growth but also for inflation,” he said.
Knot echoed his ECB colleague’s comments.
“Of course there is a serious possibility of a trade war, which is bad for an open economy like the Netherlands.” Referring to his recent visit to China, Knott said that President Xi Jinping “left a clear impression that China is prepared for anything that could come from the United States.”
Turning to domestic issues, Mr Knott warned unions that strong demands for higher wages in Europe risked accelerating inflation.
It’s natural to want to restore purchasing power, he said, but “I’m just saying to the unions, it’s a question of scale.” “Everyone feels deep down that 7% wage demand is not consistent with a return to 2% inflation.”
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