1/8
This ECB study notes that if US tariffs force China to redirect exports from the US to the EU, "the euro area could see imports from China rise by up to 10% in 2026."
ecb.europa.eu/press/blog/dat…
This ECB study notes that if US tariffs force China to redirect exports from the US to the EU, "the euro area could see imports from China rise by up to 10% in 2026."
ecb.europa.eu/press/blog/dat…
2/8
The report also notes that "additional Chinese exports could bring down headline inflation by around 0.15 percentage points in 2026," which would, in turn, allow the ECB to cut interest rates.
The report also notes that "additional Chinese exports could bring down headline inflation by around 0.15 percentage points in 2026," which would, in turn, allow the ECB to cut interest rates.
3/8
But that's not the end of the story. An ECB interest-rate cut designed to prevent a rise in EU unemployment will nonetheless shift the structure of EU production from tradable goods to non-tradables, i.e. a shift out of manufacturing and into services.
But that's not the end of the story. An ECB interest-rate cut designed to prevent a rise in EU unemployment will nonetheless shift the structure of EU production from tradable goods to non-tradables, i.e. a shift out of manufacturing and into services.
4/8
This shift would not occur because EU citizens, EU governments or the ECB wanted it to occur. It would be an automatic structural shift in the EU economy caused by an expansion in manufacturing that was engineered by Beijing for wholly domestic reasons and diverted away...
This shift would not occur because EU citizens, EU governments or the ECB wanted it to occur. It would be an automatic structural shift in the EU economy caused by an expansion in manufacturing that was engineered by Beijing for wholly domestic reasons and diverted away...
5/8
from the US economy by Washington, also for wholly domestic reasons. This is an example of how, in a hyperglobalized world, policies which change the internal imbalances in countries that choose to control their trade and capital accounts also automatically change internal...
from the US economy by Washington, also for wholly domestic reasons. This is an example of how, in a hyperglobalized world, policies which change the internal imbalances in countries that choose to control their trade and capital accounts also automatically change internal...
6/8
imbalances in countries that choose not to. To put it another way, this is an example of how one country's industrial policies can also become the industrial policies (in reverse) of another country, whether that benefits or harms the latter.
carnegieendowment.org/china-financia…
imbalances in countries that choose not to. To put it another way, this is an example of how one country's industrial policies can also become the industrial policies (in reverse) of another country, whether that benefits or harms the latter.
carnegieendowment.org/china-financia…
7/8
This obviously isn't sustainable. Either we need to reform the global trading system so as to limit the ability of major economies to externalize their internal imbalances, or all economies will eventually choose to protect themselves by raising trade and capital barriers.
This obviously isn't sustainable. Either we need to reform the global trading system so as to limit the ability of major economies to externalize their internal imbalances, or all economies will eventually choose to protect themselves by raising trade and capital barriers.
8/8
If the latter happens (and it almost certainly is happening), the result will be the global contraction in trade that Joan Robinson said was the inevitable consequence of a world of beggar-thy-neighbor trade imbalances.
If the latter happens (and it almost certainly is happening), the result will be the global contraction in trade that Joan Robinson said was the inevitable consequence of a world of beggar-thy-neighbor trade imbalances.
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