ECB's Guindos: Redirection of trade from China to Europe could happen

ECB's Guindos: Redirection of trade from China to Europe could happen

In a recent statement, ECB Executive Board member Luis de Guindos expressed concerns about the economic uncertainty surrounding the European Union (EU) and the potential redirection of trade from China to Europe. According to de Guindos, the current economic growth in the EU, particularly in the second and third quarters of 2025, is expected to be almost flat [1]. This slowdown is attributed to the lack of consumer spending as a primary driver of economic growth.

De Guindos also highlighted the importance of maintaining a flexible monetary policy, noting that the current interest rate position is appropriate for achieving the ECB's 2% inflation target. He emphasized that the ECB must keep all rate options open due to the prevailing uncertainty in the economic landscape [1].

The uncertainty surrounding the EU's economic future is further exacerbated by the ongoing trade disputes. De Guindos suggested that the EU could potentially become a reserve currency if it manages to implement the necessary economic reforms correctly [1]. This sentiment is echoed in the context of the US-China trade deal, where the US and China have finalized a trade agreement that focuses on rare earth exports [2]. The deal is part of a broader effort by the US to diversify its trade relationships and reduce its dependence on Chinese imports.

The trade spat between China and the EU, particularly regarding electric vehicles, has also impacted European businesses. French cognac makers, such as Pernod Ricard SA and Remy Cointreau SA, have seen their shares rise following a tentative deal with the Chinese government to end the trade spat [3]. However, the finalization of this deal is contingent on the resolution of the broader trade dispute between China and the EU.

In conclusion, de Guindos' comments highlight the economic uncertainty facing the EU and the potential for a redirection of trade from China to Europe. The ongoing trade negotiations and the tentative deal between China and the EU's cognac makers suggest that the EU is actively seeking to diversify its trade relationships and strengthen its economic position.

References:
[1] https://www.forexlive.com/news/ecbs-de-guindos-facing-brutal-uncertainty-20250630/
[2] https://www.livemint.com/economy/uschina-trade-deal-finalised-focus-remains-on-rare-earth-exports-washington-to-take-down-countermeasures-11751012153835.html
[3] https://www.bloomberg.com/news/articles/2025-06-27/french-cognac-makers-rise-on-reported-deal-to-end-china-spat