EU Must Balance Trade Relations with China to Prevent Economic Fallout, Says Economics Chief

Warning Against Trade Decoupling

The Importance of Open Trade

Gentiloni cautioned against a full-scale trade decoupling, which he believes would be disastrous for both Europe and China. “This is not bringing us to a theory of decoupling of global trade, which would be a disaster for both parts of the decoupling,” he stated. He called for a "more mature" approach to trade, noting that the EU's economy is “more open, more influenced by trade, and less by only internal consumption.” Maintaining open trade is crucial for the EU's economic well-being.

U.S. Tariffs and Chinese Response

This comes as the United States recently imposed significant tariffs on $18 billion worth of Chinese imports, including EVs and lithium-ion batteries. China defends its EV market growth as innovation-driven rather than subsidy-driven and criticizes the U.S. Inflation Reduction Act for its protectionist tendencies.

Positive Economic Outlook

Looking ahead, Gentiloni highlighted the EU's economic prospects, predicting that private consumption will drive economic activity in the coming year. He pointed out positive trends such as decreasing inflation and consistently high employment, which should aid the EU's recovery from the economic difficulties faced in 2023. Despite the challenges posed by the Russia-Ukraine war and past economic stagnation, Gentiloni remains optimistic about the EU's economic future. “Gradually, activity is accelerating, and the main driver will be private consumption. At the same time, we have two other factors that are very positive,” he said. “Inflation is indeed declining. And employment is still high, very high, it will continue to increase in the coming months.”