Valdis Dombrovskis, Vice Chairman of the EU Committee for European and Social Dialogue, was photographed at the Renaissance Harbor View Hotel in Wan Chai. South China Morning Post/Chen Xiaomei, December 2, 2017 (Photo by Chen Xiaomei/South China Morning Post/Getty Images)
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The European Union’s trade chief warned on Wednesday against “weaponizing” trade amid the latest escalation in tensions between China and the United States.
EU Trade Commissioner Valdis Dombrovskis told CNBC he did not see trade “protectionism” as the answer to rising geopolitical tensions, but insisted the EU was willing to work in the new trading environment Defend yourself.
“The geopolitical landscape is changing, becoming more fragmented and more conflictual, and we are seeing the weaponization of trade. So as the EU we also need to be prepared to play a role in this more conflictual world, “Dombrovskis told CNBC’s Karen Tso.
His comments were in response to comments made on Tuesday by former European Central Bank president and former Italian Prime Minister Mario Draghi, who said the EU needed to remain competitive if it was to remain competitive in the face of rejection by China and the United States. “Fundamental changes” are necessary.
On this occasion, US President Biden will call for United States Trade Representative Katherine Tai tripled Chinese import tariffs on steel and aluminum as she seeks to increase union support in the swing state of Pennsylvania.
Such measures would essentially prevent Chinese steel from being sold in the United States and could divert Chinese goods to other global markets.
Dombrovskis said the proposals would have a clear impact on the EU, noting that representatives are currently negotiating with the United States over China tariffs.
“Obviously this will have wider implications because the steel market is obviously globally connected,” he said.
Biden’s call marks the latest escalation in tensions between the world’s two largest economies over concerns about overcapacity in China. Washington and its allies accuse China of flooding international markets with cheap goods and undermining the competitiveness of domestic companies – something Beijing vehemently denies.
Last week, U.S. Treasury Secretary Janet Yellen said she would not rule out imposing tariffs on China’s green energy exports as the country ramps up production of solar, electric vehicles and lithium-ion batteries.
European Commission President Ursula von der Leyen followed up with her remarks, saying Brussels must take a tough stance on trade with China.
However, Europe needs to maintain a delicate balance between not alienating one of its largest trading partners while remaining true to its transatlantic geopolitical and economic alliance.
“The EU will be ready to stand up and defend our economy and our companies if necessary,” Dombrovskis said.
He made the remarks on the sidelines of the International Monetary Fund’s spring meetings, which released its World Economic Outlook on Tuesday and highlighted geopolitical tensions as a major threat to global growth.
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