Tom Fairless

Germany escaped the first China shock that sort of rattled the US economy because it produced higher end goods and it produced the machinery that China needed.

But now China doesn't need Germany so much anymore because it produces all the stuff itself.

The German China shock could be even more severe than the US China shock because for the US, it wasn't the core of the US economy.

It was furniture and toys.

But machinery and cars is really the heart of the German economy.

So German industry is really rattled and lobbyists are speaking out more and more for tariffs in Brussels.

I think some kind of deal, either on the currency or

that maybe if China agreed to allow the yuan to appreciate, or on some kind of tariffs against certain products, could buy time for European industries.

From the European perspective, there seems to be a growing sense that they're going to lose this battle, that for large parts of the world,

expensive German products will not be competitive anymore and that they have to climb the value chain.

They have to focus on really the highest end manufacturing goods and also probably refocus on the European market.

Probably markets like India and Brazil are maybe lost in future because China is just too dominant.

So some kind of agreement with China could buy time.

I think one thing that the Europeans would like is if the Chinese were to build more factories in Europe and to share some of the technologies, it would be a sort of reverse of what European and US companies were doing in China where they were sharing tech.

It would be China coming to Europe and sharing tech.

The question is whether China would accept.

And there's some question about that.

I mean, everyone's energy bills in Europe have gone up substantially, and that is exacerbating a cost of living crisis in the U.K., and it's also feeding into a sense that the system has failed them.

I think it's fair to say that Europe was hit by a combination of bad policy and bad luck when it comes to climate.

It was bad policy in the sense that it charged ahead with a massive shift in how it produced electricity without really investing...