ECB Warns of Euro Area Job Disruptions Amid US-China Trade War and Chinese Competition
The European Central Bank (ECB) has issued warnings about potential disruptions to the labour market in the euro area, highlighting the risks posed by the US-China trade war and increasing Chinese competition. Firms are urged to adapt to a more competitive global environment, as sectors like vehicles and chemicals have already seen significant job losses.
The ECB cautions that challenges such as job market inefficiencies and government policies may cause temporary disruptions before a new equilibrium is reached. The Trump administration's tariff war with China could push the Asian giant closer to the EU, potentially leading to fewer job offers and more unemployment in Europe.
Between 2019 and 2024, labour demand in the vehicle sector plummeted by 55 percent, and by a staggering 95 percent in the chemical industry due to increased Chinese competition. Trade shocks may cause short-term disruptions and shift jobs across sectors, but total employment may remain relatively stable in the long run as the economy adjusts.
The ECB warns that the rising competitiveness of Chinese exports poses significant challenges for euro area labour markets, potentially affecting nearly one-third of employment. Trade tensions with the United States may also trigger adverse effects on employment in the euro area. Germany and other Western European countries, with their significant export-oriented manufacturing sectors, are expected to be most affected by growing competition from Chinese exports.
To mitigate these labour market impacts, the ECB suggests fostering plurilateral free trade agreements, prioritizing economic policy conflicts clearly, and promoting investment in productivity and innovation to maintain competitiveness. Sectors facing greater competition from China have already experienced larger declines in job vacancies, underscoring the need for proactive measures to adapt to this increasingly competitive global environment.
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