Janet Yellen, the US Treasury secretary, called on the EU to intervene urgently to mitigate rising levels of cut-price Chinese green technology exports, including solar panels and wind turbines, pushing European leaders to move to an all-out trade war.
At the same time, she called on German bank leaders on Tuesday to step up efforts to comply with sanctions against Russia and stop attempts to circumvent them to avoid potential penalties that could deny them access to dollars by the US.
Her remarks, in Frankfurt, come just hours after the president of the European Commission, Ursula von der Leyen, gave the strongest hint yet that the EU will join the US in imposing tariffs on Chinese electric vehicles following the soon-to-finish investigation into alleged state subsidies. automotive industry in China.
Yellen said it was the duty of the US and its Western allies to respond in a “united manner” as China’s rising output threatened industries in all their markets.
EU wind turbine makers have protested being undercut by 50% by Chinese rivals in a move that appeals to cash-strapped national and regional governments facing targets to cut greenhouse gases.
Yellen defended the 100 percent tariffs, which have been criticized as protectionist and a potential flashpoint that could spark wider trade wars with China.
“China’s industrial policy may seem far away as we sit here in this room, but if we don’t respond strategically and in a unified way, the sustainability of business in our countries and around the world could be at risk,” Yellen said at the Frankfurt School of Finance and Management in Tuesday.
The EU, which sells a larger share of its exports to China than to the US, is pursuing a policy of de-risking rather than decoupling and hopes its approach, which includes investigations into more than 20 trade sectors, will focus Beijing’s attention.
China has signaled it will retaliate against any tariffs with potential tariffs on French brandy, EU wine and dairy products.
Von der Leyen said Europe would take a different approach than the US. While tariffs are expected to increase, they are unlikely to match the rate imposed by the US.
Von der Leyen told the Financial Times that China has “huge overcapacity” that is “flooding” the EU market with “artificially cheap products”.
She said she expected an investigation into alleged Chinese state subsidies, launched last September and to conclude by June 5, to conclude there were “excessive production subsidies”.
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The EU’s response would be “that the level of tariffs corresponds to the level of damage done”, she added, indicating that the EU will not introduce import tariffs of 100 percent.
“It’s not about closing the market or protectionism,” she said.
The standoff with China comes less than two weeks after President Xi Jinping met with von der Leyen and French President Emmanuel Macron in hopes of persuading him to cut production levels in China.
Yellen’s message on Russian sanctions is believed to be rooted in new evidence seen by the US and EU of sanctions circumvention by the Kremlin, with goods ordered by Hong Kong businesses from multinational technology firms, for example, ending up in Russia.
“Russia is desperate to get critical goods from advanced economies like Germany and the US,” Yellen said. “We must remain vigilant to prevent the Kremlin’s ability to supply its defense industrial base and to access our financial systems to do so.”