How the looming US-China trade war is stirring Europe’s economic waters

A conscious entrepreneur does not only tackle the risks close to home but also looks beyond what’s ahead. That is our mission at Euler Hermes. In a globalised economy, it is no longer thinkable to turn a blind eye on foreign political instability or trade conflicts. For more than two years now, Brexit has been pending and its consequences are still unknown. Coinciding with the UK’s departure from the European Union, a trade war between the US and China is forthcoming. Businesses all over the world are holding their collective breaths.

In war, there are no winners. But when it comes to the imminent trade conflict between the US and China, Europe may well turn out to be the biggest loser. Still nursing the wounds inflicted by their own financial crisis, European businesses are uneasy about this new commercial threat that is lurking. It may put an abrupt stop to the economic upswing of Europe in recent months – the strongest one in ten years, to say the least.

Made in China

With an economy strongly relying on trade, European businesspeople and politicians fear that newly born import taxes will impede the region’s current economic boom. Their co-dependent relationship with both the US and China has made many European countries wary of the future. The showdown between the two superpowers may drag European businesses down too: ‘collateral damage’ they may say.

Fighting on two fronts

Bear in mind that the EU is also fighting its own battle with the US over import tariffs imposed on steel and aluminium. As a result of this, many US goods have been met with similar unwelcoming tax increases.

Looking for allies

European companies are already taking necessary precautions by reducing their economic outlook. In the meantime, China has embarked on a charm offensive, establishing deeper commercial alliances with Europe. But it remains to be seen whether the EU, a long-time ally of the US, will turn its back on its economic accomplice. If, on the other hand, the US and China agree to dissolve existing bans and tariffs, Europe could be in for a patch of bad weather.