Collateral damage: in a US-China trade war, Europe could be the big loser
As a net exporter, the EU is likely to suffer during any slowdown in global trade, particularly if China targets products like BMW and Mercedes cars produced in the US
European businesses are unsettled as they watch the US and China collide over trade. And for good reason: the nascent global trade war could represent the biggest single threat to the economic upswing that has helped the region get past its financial crisis.
In theory, some European companies could benefit, jumping into market niches if Chinese businesses are kept out of the US market. But that would only be a few companies or sectors.
When your entire economy is heavily dependent on trade, an overall slowdown in global commerce caused by tit-for-tat import taxes provokes fear and undermines confidence.
And that is just what’s happening in Europe. By one measure, business confidence has fallen in six of the past seven months in Germany, where exports are almost half of annual economic output.
“It’s worth all our efforts to defuse this conflict, so it doesn’t become a war,” German Chancellor Angela Merkel said on Wednesday.