The EU’s attempts to protect its domestic industry appear to be frustrating both the US and China, while the UK received good news about the performance of its manufacturing sector, although experts question how long the success can last amid the ongoing war in Iran.
While talks for a new peace deal with Iran appear to be progressing, reports suggest revisions are being made by the US team.
Beijing’s warning to EU
EU plans to create new trade policy tools to curb cheap Chinese imports into the bloc have hit their first roadblock.
Beijing warned on Saturday (30 May) it would retaliate against any attempts to impose new trade restriction on its products.
“If the EU insists on unilaterally introducing new trade instruments and adopting discriminatory restrictions, China will take resolute countermeasures and effective steps to safeguard its own interests,” the Chinese Ministry of Commerce wrote in a statement.
The warning follows Germany agreeing to the tougher trade measures on Friday (29 May). It had previously failed to endorse a strategy penned by France and signed by other leading EU powers, outlining policy shifts such as greater tariff powers and reduced import quotas that would hit Chinese exports.
As Europe’s trade deficit with China grows and its industrial base weakens, the need to stem the number of cheap imported goods challenging its manufacturers has become a priority for policymakers.
You can read more on that story, and others affecting EU trade, in today’s member-exclusive Europe Trade Digest.
Good news for UK manufacturing
A strong start to the week for the UK’s manufacturers, as the latest Purchasing Managers’ Index (PMI) indicated sector growth and another month of improvement.
S&P Global’s May PMI found that “the upturn in the UK manufacturing sector gather pace”, with production volume’s hitting a three-month high. The overall PMI figure rose to 53.9 in May, as slight improvement on the 53.7 recorded in April – anything above 50 signals industry growth.
Increased orders were driven by both domestic and international demand. The report noted that export orders rose for the fifth month in a row, with increased purchases from mainland China, Europe, Japan, North America and South Korea.
However, director at S&P Global Market Intelligence Rob Dobson warned that “the sustainability of the upturn remains in doubt”, noting that order increases could be a result of customers “front-loading purchases” ahead of increasing costs and supply chain disruption caused by the Iran war.
The news also comes ahead of the EU’s reduction in steel quotas and its increasing import duties, which are set to come into effect a month from today (1 July). UK Steel warned the measures will “severely curtail” UK access to the EU market.
Getting closer to the US-Iran peace deal?
US President Donald Trump is reportedly seeking to amend the latest proposal for a peace deal with Iran, following a discussion with top aides held Friday (29 May).
According to Axios reporting this weekend, the latest draft included terms such as a 60-day cessation of violence, the reopening of the Strait of Hormuz and a framework to reopen negotiations on Iran's nuclear program.
Trump’s team is reportedly keen to make changes related to the Strait of Hormuz and Iranian uranium enrichment.
The effective closure of the Strait of Hormuz since fighting began at the end of February has led to rising energy prices and supply chain disruption.
In a joint statement published last week (29 May), the WTO, International Energy Agency, World Bank and International Monetary Fund warned that while the world economy has remained resilient, the effects of the closure have been borne disproportionately by more “vulnerable” countries.
US-Germany clash
Germany has defended itself following US claims that a planned streaming law drafted by Berlin could violate the US-EU trade deal.
The law would require streaming services to invest more in local film production. US Trade Representative Jamieson Greer said on Thursday (28 May) that the proposal constituted a “tax” and that would see US firms financing protectionist measures, adding that it went against the terms of the trade deal agreed last year.
Stefan Kornelius, chief spokesperson for German chancellor Fredrich Merz, invoked the WTO when defending the legitimacy of the policy. He told reporters that the trade deal prevents “unjustified digital trade barriers”.
“These are not market access barriers, but rather cultural policy measures recognised as such at the WTO level.”
The dispute follows the EU’s internal agreement on the ratification of the trade deal, ahead of a 4 July deadline imposed by Trump.
It’s also the latest inflection point over EU attempts to gain control of digital products and services that enter its market, after the USTR said the use of the Digital Markets Acts was “discriminatory” towards US firms.
Elsewhere in the headlines
· The US is seeking to prevent leading semiconductor firms from exporting advanced chips to Chinese firms based outside of Mainland China
· Ukrainian attack on Russian refineries have led Moscow to ban exports of jet fuel until the end of November
Also coming up this week
· Monday: Defence secretary John Healey responds to questions in the Commons amid the delay to the Defence Investment Plan
· Tuesday: US State Department hosts talks between Israel and Lebanon
· Wednesday: European Court of Justice to rule on Meta challenge to gatekeeper designation under Europe’s Digital Markets Act
· Thursday: OECD Steel Outlook published
· Friday: EU Q1 GDP update and Bank of England decision maker panel data published
· Saturday: England play New Zealand in World Cup warm-up match
· Sunday: GMB Union Congress begins
