Since President Donald Trump’s inauguration, he has announced more than 50 new or revised tariffs, including suspensions, setbacks, escalations and escalations.
As the state of US-China trade relations remains uncertain, many US companies are considering alternative sources.
Without a transition to various sources, prices could rise, and US businesses and consumers may need to reduce or replace one product with another (a virtually similar product).
In this scenario, Europe was able to play an important role as both an exporter and an importer.
“Europe faces increasingly challenging challenges. How China and the US move from being the recipients of decisions to actively shape their futures,” Francesca Ghiretti, director of the Rand Europe China Initiative, said in a commentary.
On average, Europe already supplies 55% of the global export market available for products imported by the US from China.
According to nine different simulations conducted by global management consulting firm McKinsey & Company, the European Union, along with Norway, Switzerland and the UK, could replace imports from China with exports, even in the face of high US tariffs on European goods.
Each simulation assumes that the import value from China for each US product will be zero, and instead the US sources each product from other exporters.
Product Transactions
Europe’s role in this scenario is most prominent in terms of electronics, other manufacturing and textiles. The US has $191 billion, $52 billion and $45 billion within each of these industries, respectively.
These are the same sectors that the US currently imports primarily from China.
In particular, in electronics, Europe could be a major alternative supplier in the US market.
Another example is toys. Europe was able to supply Czech and German toys to the US market and replace toys made in China. This allows European consumers to purchase more and more Chinese-made toys.
As Europe has increased its exports to the US, it has also become a key destination for China’s exports, absorbing up to 55% of China’s current shipments to the US.
This change could lead to deeper trade interdependence between Europe and China, as well as geopolitical tensions.
“The next few months and years will challenge whether Europe can maintain its course or whether it will lose itself in an attempt to meet the ongoing challenges,” Francesca Giletti said.
