China’s EU strategy

In slapping tariff hikes on Chinese electric vehicle imports, the European Union has an effective shield against retaliation by Beijing: the US. While China's Commerce Ministry and its chamber of commerce in the EU decried the move by Brussels this week to take levies on Chinese vehicles to as high as 48% starting next month, it's unlikely to take aggressive measures in response, analysts said. The danger is that a too-strong response effectively opens a two-front trade war. Former President Donald Trump — who launched the initial trade war against China with multiple rounds of tariff hikes on Chinese goods in his first term — leads in some polls ahead of the November election. And even if President Joe Biden wins a second term, his administration has only tightened restrictions against Chinese companies, not loosened them.  "If China responds in kind with aggressive tariffs, they risk triggering a trade war," said Joe Peissel, an economic analyst at research firm Trivium China. "Beijing is desperate" to avoid that, he said. Robust retaliation could backfire in China in other ways as well. President Xi Jinping has tried to encourage "strategic autonomy" in Europe, effectively splitting off from the US, its military ally. Just last month he made a state visit to France to further that endeavor. Provoking European leaders with a powerful set of tariff hikes or other steps could give Brussels moreincentive to join in US efforts to coordinate policies against Beijing. There's already been an increase in coordination among advanced economies against China, with the Group of Seven in recent weeks beginning to call out the nation by name for distorting the global economy. The Mercator Institute for China Studies, a Berlin-based research institute focusing on China, predicted that Chinese retaliation will focus on less economically strategic items like  imported EU cheese and pork. Brandy has also been on Beijing's watchlist. "Beijing won't target the EU products it still needs," MERICS lead analyst Jacob Gunter wrote in a note Thursday. Those goods include machinery, high-quality industrial inputs, chemicals and medical-technology items, he said. Read more: Xi Has Few Options to Punish Europe Without Sparking Trade War Germany Trying to Prevent or Soften EU Tariffs on Chinese EVs Stellantis May Move Some Chinese EV Output to Europe on Tariffs The Best of Bloomberg Economics US Treasury Secretary Janet Yellen said she is most concerned about smaller Chinese banks doing business with Russia. UK inflation expectations fell to the lowest in three years, but the public is yet to be convinced rate cuts are under way. Norway's planned clampdown on the nation's wealthiest citizens is provoking a backlash from entrepreneurs. Turkish lawmakers have drafted new tax proposals aimed mostly at companies, seeking to repair a budget buffeted by last year's earthquakes. Having stabilized the economy, Venezuelan President Nicolás Maduro is now seeking to soften his despot image. Read the Big Take.  Here's how higher rates are boosting US spending and the economy. Need-to-Know Research Marking his 50th birthday this week, Deutsche Bank global head of economics and thematic research Jim Reid took a look at how different assets performed over his lifetime. Measuring inflation-adjusted returns of 10,000 units of local currency, the winner was Indian equities, where the hypothetical initial June 1974 investment would now be worth 707,000 rupees in real terms. US stocks followed, with $375,000. UK shares and US Treasuries rounded out his top five, he wrote in a note Wednesday. "Although it feels like we live in an era of unparalleled wealth creation in housing, the long-term returns can't come close to competing with equities and have even lagged most bond markets assuming you live in them and don't rent them out," Reid wrote. "If you have a young relative today and you want them to remember you fondly in 2074, maybe stash a little bit away for them now (probably in equities) and don't listen to any of us strategists trying to time the market."