EU, China have much to lose if trade war breaks out: Analysts

EU, China have much to lose if trade war breaks out: Analysts

BRUSSELS - The latest tit-for-tat EU-China trade disputes could signal worse to come but both sides have a lot to lose if things get out of hand and harm the much-needed economic growth they seek, analysts said.

In May alone, the two have locked horns over solar panels, steel tubes and telecoms equipment, sparking fears of a trade war between two of the world's biggest trading partners.

Analysts said the increase in tensions could simply reflect the fact that both are feeling the pressure from a sharp economic slowdown.

China grew at its slowest pace in 13 years in 2012 while the EU economy, sapped by the debt crisis and soaring unemployment, is mired in a record-long recession.

"I think the fact that the EU is in a negative growth spiral cannot be divorced from their trade actions with China," said Sergio Marchi, head of the Marchi Group management consultancy and former Canadian International Trade Minister and ambassador to the World Trade Organization.

EU political leaders "at this time of job losses and economic hardship want to demonstrate to their constituents that they are tough in the face of any challenges from China," Mr Marchi said.

But the danger is that they go too far.

"The EU must be careful in not overplaying its hand. China understands politics but they don't like being put on the public spot, especially if it runs the risk of losing face publicly.

"If they decide to fight back, then the EU might be facing a lose-lose scenario," Mr Marchi added.

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