Janet Yellen, the US Treasury Secretary, has urged the EU to urgently intervene to temper growing export levels of Chinese cheap green technology, including solar panels and wind turbines, pushing European leaders to move into a large-scale trade war.
At the same time, she urged German bank executives on Tuesday to step up efforts to comply with sanctions against Russia and stop efforts to circumvent them in order to themselves avoid possible penalties that could lead to the US would deprive them of access to the dollar.
Her comments in Frankfurt come just hours after European Commission President Ursula von der Leyen gave her strongest hint yet that the EU would join the US and impose tariffs on Chinese electric vehicles after a soon-to-be-completed investigation into alleged state subsidies for the automotive industry in China.
Yellen said it behooved the US and its Western allies to respond in a “united manner” as China’s growing output threatened industries in all their markets.
EU wind turbine manufacturers have protested against Chinese rivals undercutting them by 50%, a move that is appealing to cash-strapped state and regional authorities faced with energy targets reduction of greenhouse gases.
Yellen defended the 100% tariffs, which have been criticized as protectionist and a potential flashpoint that could lead to broader trade wars with China.
“China’s industrial policy may seem far away as we sit here in this room, but if we do not respond strategically and unitedly, the viability of businesses both in our countries and around the world could be at risk,” Yellen said at the conference. Frankfurt School of Finance and Management on Tuesday.
The EU, which sells a larger share of its exports to China than to the US, is pursuing a policy of risk reduction rather than decoupling, and hopes its approach, which involves examining more than 20 trade sectors, will focus Beijing’s attention .
China has said it will retaliate against possible import duties on French cognac, EU wine and dairy products.
Von der Leyen said Europe would take a different approach to the US. Although an increase in tariffs is expected, it is unlikely that they will be as high as the tariffs imposed by the US.
Von der Leyen told the Financial Times that China had “huge overcapacity”, leaving the EU market “flooded” with “artificially cheap products”.
She said she expected the investigation into alleged Chinese state subsidies to start last September and be completed by June 5, concluding that there had been “excessive production subsidies”.
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The EU’s response would be “that the level of import duties would correspond to the extent of the damage caused,” she added, indicating that the EU would not impose 100% tariffs.
“It’s not about closing the market or protectionism,” she said.
The friction with China comes less than two weeks after President Xi Jinping met Von der Leyen and French President Emmanuel Macron in hopes of convincing him to cut production levels in China.
Yellen’s message on Russian sanctions is believed to be rooted in new evidence the US and EU have seen of Kremlin sanctions circumvention, with goods ordered by Hong Kong companies, for example, from multinational technology companies in Russia end up.
“Russia is desperate for critical goods from advanced economies like Germany and the US,” Yellen said. “We must remain vigilant to prevent the Kremlin from supplying its defense industrial base, and to access our financial systems to do so.”