An ifo study concludes that extra EU tariffs on Chinese imports can only partly fix critical dependencies and unfair competitive pressure. European industry sells about a quarter of its output outside the EU, where such tariffs do not apply.
ifo researchers Lisandra Flach and Andreas Baur conclude in a new paper that additional EU tariffs on Chinese imports can only partly address critical dependencies and unfair competitive pressure from China. Depending on their design, tariffs carry significant economic costs and often unintended side effects. More expensive Chinese inputs mainly weaken the competitive position of export-oriented firms against foreign rivals.
Such tariffs also do not apply in markets outside the EU, yet European industry sells roughly a quarter of its output there, and far more in some sectors. The authors therefore recommend that the EU not go it alone on China policy but instead build alliances, which would give it much stronger bargaining power against Beijing.
They warn against measures such as blanket buy-European rules or undifferentiated protective tariffs, which risk hitting exactly the partners needed for a joint approach. For companies with China-dependent supply chains it remains open which additional trade-policy tools the EU will propose next.
What this means for decision-makers
- Assess China dependencies in your supply chain independently of EU tariff policy.
- Watch EU talks with partner countries, since joint approaches are becoming more likely.
- Avoid relying on tariffs alone and strengthen your own competitiveness and innovation instead.
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