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Any tariff-related diversion appears modest and confined to a narrow set of products, researchers say
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US PRESIDENT Donald Trump’s trade levies are not the main reason why China is exporting more to other parts of the world, a European Central Bank (ECB) study showed.
“Any tariff-related diversion appears modest and confined to a narrow set of products, indicating limited spillovers from US tariffs to third destinations,” researchers Julien Le Roux and Tajda Spital said.
Instead, “weak domestic demand has pushed Chinese firms to channel excess capacity abroad, supported by falling export prices, competitiveness gains reinforced by a weak currency, and state-led expansion of manufacturing capacity”.
The US levies have fed concern at the ECB that China may divert goods to the euro area, increasing competition for companies in the currency bloc. More dovish policymakers also see this as a downside risk for inflation, which is already forecast to undershoot 2 per cent.
France’s Francois Villeroy de Galhau said this month that rising imports from China and lower costs for those products in the second half of 2025 make for a “quite strong disinflationary effect”. Executive board member Isabel Schnabel has, meanwhile, pointed out that the fallout from Chinese diversion has been “weaker than expected”.
Chinese exports rose 5.5 per cent last year, up from 4.6 per cent in 2024, the ECB said. While shipments to the US dropped by 20 per cent – strongly driven by tariffs – those to the eurozone rose by 8 per cent. Other Asian nations, Africa and Latin America also saw an increase.
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The ECB study cautioned that it may still be too early to have a full picture of the tariff fallout because of “anticipatory behaviour, implementation lags at customs, shipping delays and other factors”. BLOOMBERG
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MDDI (P) 046/10/2024. Published by SPH Media Limited, Co. Regn. No. 202120748H. Copyright © 2026 SPH Media Limited. All rights reserved.
