European Central Bank Governing Council member Klaas Knot said China may resort to selling products at reduced prices in Europe if the U.S. initiates a trade war by imposing new tariffs.
“There is a possibility that China will begin offering goods in Europe at increasingly lower prices. We are already witnessing this trend in the steel market. In essence, China could export its deflation to Europe,” he added.
Global policymakers are closely monitoring the U.S. for signs of potential trade levies as Donald Trump prepares to return to the White House in January. Trump has pledged to introduce tariffs targeting several nations, with China being a primary focus.
“The likelihood of a trade war is substantial, and this poses a serious threat to open economies,” Knot said, adding that President Xi Jinping made it clear that China is ready to respond to any actions taken by the U.S.
On domestic matters, Knot issued a warning to labor unions, emphasizing that excessive wage demands could accelerate inflation in Europe.