Standard Chartered analysts Christopher Graham and Carol Liao discuss how the European Union is seeking to rebalance its trade relationship with China without shutting the door on engagement. They highlight a large and rising trade deficit, ongoing EU-China negotiations, and the development of new trade tools. The report stresses moderate escalation risk and a likely focus on supporting domestic industry.

EU weighs new trade defence tools

"Eurostat data shows the EU’s 12-month rolling trade deficit with China stood at EUR 376bn in May (8% higher than a year earlier), intensifying concerns among European leaders over what is perceived to be an increasingly lopsided trading relationship."

"Both sides have agreed to spend the next three months discussing ways to rebalance that relationship as part of their broader Trade and Investment Consultation launched in late June."

"In the background, the EU is developing new trade tools, including diversification and overcapacity instruments."

"If nothing tangible is delivered via talks, these tools could be activated in October."

"More EU trade defence measures are likely to materialise, but they will be carefully calibrated to avoid a tit-for-tat escalation."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)