البنك المركزي الأوروبي، فرانكفورت 18 يوليو 2024 (Getty)
A member of the European Central Bank’s (ECB) executive board warned Saturday that risks to inflation in the Eurozone are “significant” in both directions, adding that the impact of cheaper Chinese imports on prices warrants close attention. Fabio Panetta stated that the ECB’s new economic forecasts, due in March, will provide further guidance for monetary policy decisions in the coming months, following a larger-than-expected slowdown in inflation at the start of 2026.
Panetta, who also heads the Bank of Italy, said in prepared remarks at the Asiam Forex Financial Conference, “The risks to inflation, both upside and downside, are significant.” He added, “Monetary policy must maintain a flexible approach linked to the medium-term outlook and based on a comprehensive assessment of data and their implications for inflation and growth.” Inflation in the Eurozone fell to a 16-month low of 1.7% in January, below the ECB’s 2% target, prompting some policymakers to caution that price growth could unhurried considerably.
The recent decline in inflation “has not fundamentally changed the medium-term assessment, but it highlights a number of aspects that necessitate to be monitored,” Panetta noted. “The most important of these is the trend in imports from China.” China has regained its position as Germany’s top trading partner, surpassing the United States. The Federal Statistical Office announced Friday that trade volume between Germany and China reached €251.8 billion last year, a 2.1% increase, reclaiming the top spot. Despite a 5% decline in trade between the two countries, the United States remained Germany’s second-largest trading partner with a volume of €240.5 billion.
Economists believe U.S. Tariffs have prompted China to shift goods to Europe, and particularly to the German market. Simultaneously, American producers benefited from easier access to the European Union market, increasing their exports to Germany by 2.7%. The European Commission in Brussels confirmed Friday it will continue its campaign to reduce tariffs, following a U.S. Supreme Court ruling against aggressive American tariff policies. This development underscores the ongoing complexities of global trade relations and their impact on regional economies.
German Chancellor to Visit China to Discuss Trade Relations
German Chancellor Friedrich Merz is scheduled to visit China next week to discuss political and economic relations, as well as security issues. This will be Merz’s first visit to China since taking office. Tensions exist between Berlin and Beijing, particularly regarding rare earths – critical raw materials used in products like mobile phones and electric vehicles. Merz will be accompanied by a business delegation and will also participate in a meeting of the German-Chinese Economic Advisory Committee.
Hildegard Müller, president of the German Association of the Automotive Industry, stated in comments to be published Sunday in the German newspaper “Welt am Sonntag”: “The German side must clearly detail in which areas China is distorting competition… The overall goal of the talks should be to continue opening up markets reciprocally and not to engage in mutual closure. China is also required to deliver here.”
Müller added, “We also expect constructive proposals from China to remove distortions of competition.” However, she cautioned against provoking countermeasures through new EU directives, such as preferential treatment for European cars in public procurement, purchase incentives, or the imposition of tariffs. “Even if China is now required to craft offers, Europe as a whole must balance its actions and the resulting reactions. Depending on the decision taken, the industry there could face countermeasures from China.”
(Reuters, Al Arabi Al Jadeed)
