Trade war unlikely after EU tariffs on China Commerzbank
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TRADE WAR UNLIKELY AFTER EU TARIFFS ON CHINA EVS - COMMERZBANK
It's a busy day for markets. Macron has asked his rivals to join an electoral pact against the far right, key U.S. inflation figures are less than an hour away, and the Fed meets later today.
As well as all this, traders are digesting news that the EU will impose tariffs of up to 38% on Chinese electric vehicles.
According to Commerzbank analysts, the move will also have an economic impact on German car manufacturers who produce electric vehicles in China and import them to Europe, and any retaliation from China might also have an impact closer to home.
"This would also affect the German automotive industry, as China is an important sales market for German car brands," they write in a note.
Despite the jitters Commerzbank believes an escalation into a full-scale trade war is unlikely. Based on this assumption, the potential impact on inflation is also low.
"For every 100 euros spent by the average German consumer, for example, only 0.3 euros can be traced back to Chinese production in the automotive industry," they explain.
Given inflation in Europe and the fact that economic growth is recovering in China, neither party has any incentive for a trade war a the moment, they say.
"Furthermore, the trade volume at stake in this trade dispute is a relatively small proportion of the total trade volume between the two blocs."
(Lucy Raitano)
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