Janet Yellen, the US Treasury Secretary, has called on the EU to intervene urgently to curb growing exports of cheap Chinese green technology such as solar panels and wind turbines, and urged European leaders to launch an all-out trade war.
At the same time, it called on German bank executives on Tuesday to step up their efforts to comply with sanctions against Russia and stop their evasion efforts to avoid possible penalties that could result in the US cutting them off from access to the dollar.
Her comments in Frankfurt came 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, following an investigation into the alleged allegation soon State subsidies for the automobile industry in China will be completed.
Yellen said it was the duty of the U.S. and its Western allies to respond “unified” as China’s growing production posed a threat to industries in all their markets.
Wind turbine makers in the EU have protested that Chinese rivals are undercutting them by 50%, attractive to cash-strapped state and regional authorities seeking greenhouse gas reduction targets.
Yellen defended the 100 percent tariffs, which have been criticized as protectionist and a potential flashpoint that could trigger broader trade wars with China.
“China’s industrial policy may seem distant to us in this room, but unless we respond strategically and unitedly, the viability of companies in both our countries and around the world could be at risk,” Yellen said at the Frankfurt School of Finance and Management conference on Tuesday.
The EU, which handles a larger share of exports to China than the US, is pursuing a policy of risk minimisation rather than decoupling and hopes that its approach, which includes investigations in more than 20 trade sectors, will put Beijing on the right track.
China has signaled it will fight any tariffs with possible tariffs on French brandy, EU wine and dairy products.
Von der Leyen said Europe would take a different approach than the US. Although an increase in tariffs is expected, it is unlikely that they will match the rate imposed by the US.
Von der Leyen told the Financial Times that China has “massive overcapacity” that is “flooding” the EU market with “artificially cheap products.”
She said she expected the investigation into alleged Chinese state subsidies, launched last September and completed by June 5, to conclude that there were “excessive production subsidies.”
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The EU’s response would be “that the level of tariffs would be commensurate with the amount of damage caused,” she added, pointing out that the EU would not impose 100% import duties.
“It’s not about market isolation or protectionism,” she said.
The tensions with China come less than two weeks after President Xi met Jinping 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 based on new evidence the US and EU have seen of sanctions evasion by the Kremlin, with goods ordered by companies in Hong Kong from multinational technology firms, for example, being sold in Russia landed.
“Russia is desperate for essential goods from advanced economies like Germany and the United States,” Yellen said. “We must remain vigilant to prevent the Kremlin from being able to power its defense industrial base and access our financial systems to do so.”