Monday 6 May 2024

Trade war with China, hmm?

"The EU has restated its readiness to launch a trade war with China over imports of cheap electric cars, steel and cheap solar and wind technology, with Ursula von der Leyen saying the bloc will “not waver” from protecting industries and jobs after a meeting with the Chinese president, Xi Jinping, on his multi-day tour of Europe ...
If she's serious, the cost of (inter alia) net-zero programmes across Europe will go through the roof: and in principle at least, that's non-discretionary spending.  It'll be made all the more acute by the forthcoming Carbon Border Adjustment Mechanism.  I presume it would also be the final nail in the coffin of German exports to China.  And who'd have any euros left over for Ukraine?  It's quite a bluff, if that's what it is.

If she means it, well all I can say is: assuming the UK would somehow get swept up in this rather than being a lucky beneficiary of ramped-up Chinese dumping, then not for the first time in recent years, I will be very glad of my substantial hedge against inflation.  (No, not gold - that's against Bad News.)

Incidentally, you gotta smile at the nasty conference-hall-style chair Macron gave Xi at the Élysée.  That wobbly table looks rather egalitarian, too ...   He gave Trump a much nicer time.



djm said...

Smoke in Mirror Room....

Anonymous said...

This looks completely crazy to me. The time for the carbon border adjustment was about twenty years ago. Now all that industry has been hollowed out.
As for net zero, the only hope of it being viable is super cheap Chinese solar panels. Why start a trade war over this?
I am hoping we keep out of it but given Kier and Sunak are a pair of sheep, they will probably follow the EU suicidal lead on this.

Anonymous said...

What hedge, ND?

Index-linked Government Bonds? Housing?

Nick Drew said...

Index-linked Government Bonds

(tax free!)

in the run-up to their being discontinued (new issues, that is: they still allow roll-over), there was a very good theoretical argument made that every government should offer such an instrument, to allow the populace protection against inflationary govt actions

I live in expectation that Starmer will cancel them, and issue Consols as substitute

jim said...

Good news for L'Oreal.

Meanwhile the DM is telling us about all the cheap Chinese cars coming our way. Not so good is upcoming taxes on said cars. Local chap forked out £2k for smartmeter and plug and job still not finished.

The central difficulty is that ICE car making offers good economic leverage but EV making not so much. ICE making has externalities that are not too immediate whilst EV making has fairly near term externalities - power infrastructure. The ICE/EV impasse looks likely to have tax revenue implications for Western governments. If you have your opponent by the goolies they are not going to hurt you. VDL eat your heart out.

Meanwhile the US is cutting up rough over chips to China and the Chinese are making their own. The US is under supplied with engineers whilst China is over supplied. But the US wants to grab all the useful upcoming inventions for itself and keep them out of Chinese (and EU) hands. Not much can change until the US election is sorted out and we see just how unfriendly the next US government will be.

Caeser Hēméra said...
This comment has been removed by the author.
Caeser Hēméra said...

Look how China is handling it with the US, they've just moved factories over to Mexico.

How fortunate Europe hasn't a large continent, full of resources, that China is already gusset deep in, near it.