Europe must avoid ‘disaster’ of trade decoupling as it eyes China tariffs, EU’s economics chief says

The European Union must avoid a harmful decoupling of global trade as it mulls tariffs on Chinese electric vehicles and other goods, the bloc’s economic chief said Wednesday.

“I think that as far as Europe is concerned we need a more mature attitude in our trade, securing our economy … especially with China,” European Commissioner for Economy Paolo Gentiloni told CNBC’s Silvia Amaro.

Gentiloni said the EU’s ongoing anti-subsidy probes covering the EV market and wind turbines, addressing concerns that China is overwhelming global markets with green energy products.

These enquiries are a way to understand whether the subsidies prodvided by the Chinese government to domestic firms are “disrupting any chance for European companies,” Gentiloni said.

“But 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 said.

“The characteristic of the EU economy is to be more open, more influenced by trade, and less by only internal consumption. This is the reason, the economic reason, why it is in the interest of the European Union to keep the doors of trade open.”

The U.S. on Tuesday announced hefty tariff hikes on $18 billion worth of Chinese imports, across EVs and the lithium-ion batteries used in them, solar cells, steel and aluminum.

China argues that its EV market is growing due to innovation rather than state subsidies, and says the U.S. Inflation Reduction Act — which has also sparked protectionism concerns among EU officials, including Gentolioni — is subsidising U.S. manufacturing.

Meanwhile, several EU nations are nervous about potential Chinese retaliatory trade measures hitting important domestic industries, from German automotives to French cognac.

That comes as the bloc looks to recover from years of sluggish economic growth and a shallow recession in the latter half of 2023.

Gentiloni on Wednesday struck an upbeat tone on the outlook for the year, which he said followed a “very, very difficult 2023” marked by economic stagnation, increased levels of savings and uncertainty from the ongoing Russia-Ukraine war.

“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 told CNBC.

“Inflation is indeed declining. And employment is still high, very high, it will continue to increase in the coming months.”