RPT: ANALYSIS - EU Countries Unlikely To Absorb Excess Chinese Goods Amid US-China Trade Tensions

MOSCOW (UrduPoint News / Sputnik - 16th May, 2019) EU member states are unlikely to increase their imports of Chinese goods significantly, even as US-China trade tensions could force Chinese exporters to desperately look for new markets, experts told Sputnik.

After more than ten rounds of bilateral negotiations failed to produce an agreement to resolve trade disputes between the United States and China, US President Donald Trump openly accused Beijing of trying to renegotiate the deal last minute and hiked tariffs on $200 billion of Chinese goods from 10 percent to 25 percent last week.

On Monday, the US Trade Representative Office released a list of the remaining $300 billion worth of Chinese goods not subject to the new tariff tag. If the list is approved, 25 percent duties would apply to all Chinese exports to the United States.

China retaliated on Monday by charging 25 percent tariffs on $60 billion of US goods and expressed the nation's defiant stance on trade negotiations.

State broadcaster China Central Television aired a firmly worded editorial stressing that China would be ready to fight a trade war if necessary. This announcement soon went viral on Chinese social media platforms such as WeChat and Weibo.

"On the trade war, China has expressed its attitude a long time ago: we don't want to fight, but we're not afraid to fight and will have to fight when necessary. Facing both hawkish and soft stances from the United States, China's answer has always been: If you want to talk, our door is always open; if you want to fight, we'll fight until the end. As a nation experienced all kinds of storms over 5,000 years, what kind of situation we have not seen before?" the editorial said.

It added that China had been diversifying its export partners and was capable of migrating exports to the United States to other places in the world, even if the Trump administration decided to charge steep tariffs on all Chinese exports.

With 28 member states, the European Union has become China's largest trade partner in recent years, importing a record 395 billion Euros (about $442 billion) worth of Chinese goods in 2018.

However, despite the steady growth of China-EU trade, the bloc is unlikely to boost imports from China significantly due to restraints from the existing trade structure, trade experts suggested.

"Theoretically speaking, if China-US trade has been negatively affected [by the trade war], expanding our exports to the EU is definitely something we're looking to achieve. But how much we can expand, it's something worth discussing. Even if we don't want to export to the United States today and want to export to the EU, they [EU partners] need to have someone handle our exports. For example, a supermarket in the EU only needs a certain amount of products each year," Ding Chun, director of the Center for European Studies at Fudan University in Shanghai, told Sputnik.

Other market analysts raised the question of the kind of adjustments Chinese exporters needed if they wanted to move more products to EU countries.

"Ever since 2019, the trade war has driven Chinese export to the US down while brought up the export from China to Europe at a fast pace. We expect increasing diversion of Chinese export to Europe from the U.S. based on the rising tariffs and the clouded geographical outlook.

A diversion of export to Europe will exert downward pressure in European market, but the magnitude also hinges on the relative demand of other markets including the ASEAN. What's more, to adjust to the EU regulations and standards requires time so in the near term gradual increase in EU's import from China should be expected," Alicia Garcia Herrero, chief economist for Asia-Pacific at French investment-bank Natixis and a senior fellow at European research institute Bruegel, told Sputnik.

With Chinese products at risk of steep tariffs, a number of prominent European clothing companies could be forced to move their production away from OEM factories in China to avoid the extra cost.

Professor Ding from Fudan University expressed an opinion that the effect of China-US trade tensions on the existing structure of the global supply chain would have more serious consequences for the Chinese economy.

"This [the trade war] could have a direct impact on the structure of the global supply chain. If the existing supply chain has been broken and restructured, its impact will be much bigger. For example, if everyone [investors] realizes the [tariff] problem will be a long term trend, they could plan to withdraw [from production in China]. But it won't happen today or tomorrow. There'll be a long process. As China tries to upgrade its role in the global supply chain, the migration [of production] is inevitable. The external pressure [from tariffs] will accelerate this kind of migration," he said.

In a recent meeting on domestic employment situation on Monday, Chinese Premier Li Keqiang highlighted the importance of securing jobs for migrant workers amid complex and harsh conditions.

"We need to be focused on assisting migrant workers with their jobs and entrepreneurship, the provinces that host migrant labor need to try their best to keep the unemployed to stay and avoid large wave of migrant workers returning home. The provinces that provide the migrant labor need to help the returned migrant workers start new businesses locally and encourage the rural labor to find jobs close to home," Li said.

A research report from JPMorgan Chase in September 2018 predicted that China could lose 5.5 million jobs if the United States imposed 25 percent tariffs on all Chinese imports and China retaliated with reciprocal measures.

Nevertheless, Professor Ding was confident that the hard-working Chinese migrant workers were capable of handling the employment pressure without causing social instability.

"The Chinese workers are very resilient. 10-20 years ago, when workers were being laid off, they would probably go to the government for solutions. Today, they would just ask for compensations and look for another way out afterwards. They wouldn't waste their time on making demands [toward the government]. For example, so many people in China took a second job such as becoming part-time taxi drivers or starting an online shop, when they wanted to make more money," he said.

However, the expert pointed out that it was unrealistic for China to focus on high-tech industries when upgrading the nation's economic structure as advanced technologies like robots and artificial intelligence would not offer more jobs for the large number of low-skilled Chinese workers and could risk take jobs away from them.