ECB’s Knot: China Could Export Deflation to Europe in the Event of a Trade War

30 December 2024

ECB’s Knot: China Could Export Deflation to Europe in the Event of a Trade War
Klaas Knot, governor of De Nederlandsche Bank, at the European Central Bank Forum on Central Banking in Sintra, Portugal, on July 3, 2024. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Klaas Knot said on Monday that Europe could face deflation in the event of a trade war if China were to exports its goods at lower and lower prices.

In an interview with Dutch daily Volkskrant, Knot, who heads De Nederlandsche Bank, said that if a trade war were to take place, ‘there is a chance that the Chinese will start offering their goods in Europe at lower and lower prices.’

This was already happening in the steel market, he said.

‘In this way, China is, as it were, exporting its deflation to us’, he added.

The chances of a trade war were ‘serious’ and would be negative for open economies like the Dutch economy, he said.

After a recent trip to China, Knot said that President Xi Jinping had left the clear impression that China was prepared for anything that could come their way from the US.’