The European Union is likely to avoid a full-blown trade confrontation with China due to internal divisions in the bloc and fear of retaliation, according to a prominent research firm.
The projection comes amid speculation that the two sides are on the brink of a trade war, with European policymakers raising the alarm about a looming “China shock 2.0” and pushing for stronger measures to protect domestic producers from Chinese competition.
But the bloc would “continue to pull its punches” in any confrontation with Beijing due to a lack of consensus among and within Europe’s member states, the London-based Capital Economics said at an event in Hong Kong on Wednesday.
The EU also had “concerns over retaliation” if it stepped up trade tensions with China, the research firm said, and held “lingering hopes to save the rules-based global trading system” that had helped Europe in the past.