Bruegel director Guntram Wolff is joined by Alicia García-Herrero, senior fellow at Bruegel, and Zhang Weiwei, director at The China Institute of Fudan University, following up a Bruegel conference focused on the potential for closer economic links between China and the EU.
We are hosting a number of Chinese and EU experts to discuss trade relations between the three forces.
This Policy Contribution analyses the economic consequences of a full-scale trade war. The US position, focusing on bilateral trade imbalances presumably resulting from unbalanced trade policies, is seriously threatening the multilateral trading system. The authors estimate the impact would be damaging for everyone. Though the EU is partly protected by the size of its internal market, it must engage resolutely in a strategy of defence of trade multilateralism.
To help evaluate whether the market response is warranted or exaggerated, the author measured the trade impact of additional import tariffs based on standard economic theory, namely two key parameters—the tariff pass-through rate and the price elasticity of demand. The end of multilateralism seems clear, at least for trade.
China has opted for a renewed fiscal and monetary stimulus to address the risk of the US-led trade war. The dual policies send a clear signal that economic growth is the priority, but such measures do not come without a cost. Deleveraging efforts will have to be put on hold for the time being.
China has the biggest bilateral trade surplus vis-à-vis the US but is also a top holder of US government bonds. While China has started to counteract US trade tariffs, economists have been discussing the case of China acting on its holdings of US Treasuries. We review recent contributions.
Analysis of the long-term impact of the trade war and its three key players: EU, US, and China.
This blog focuses on how a more restricted access to US final demand could affect EU economies and sectors, by measuring their share of value-added absorbed in the US. The exposure of the EU as a whole in value-added terms is lower compared to that suggested by gross exports to GDP and, overall, gross exports misconstrue the picture of spill-overs through trade linkages. For individual countries, the degree to which gross exports overestimate or underestimate exposure is relatively small, with the important exception of Ireland. However, gross exports significantly overestimate the exposure of EU manufacturing to US final demand.
The US threat of trade sanctions has put the EU in a difficult position. Nevertheless, the EU must respond decisively – not just to protect its own interests but those of the multilateral trading system, and to demonstrate to the US and other partners that trade is not a zero-sum game.
The multilateral trading system has been challenged by unilateralist measures and subsequent threats of retaliation. We collect the main events that have shaped the current situation and show which trade flows have been and will potentially be affected by the various measures. We end by discussing possible scenarios moving forward for the EU.