Adds new blog post

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

IT'S NOT JUST ABOUT TARIFFS FOR CHINA-EU TRADE

Chinese exports to the U.S. slowed following President Donald Trump’s 2025 tariffs, while exports from China to the EU picked up last year – but the shift isn’t just about the levies, according to a BofA Global Research report.

“There has been no statistically robust increase in China's export growth to the EU due to 2025 US tariff-induced trade rerouting,” the report said.

“EU imports from China being well above pre-pandemic trends even before 2025 suggests other structural forces are at play, including genuine comparative advantage, targeted domestic subsidies and vent-for-surplus behaviour,” it said.

The vent-for-surplus theory describes the practice of external markets taking in surplus domestic capacity.

The BofA Global Research report found sectors that face under-performing domestic demand in China have higher export volumes and weaker unit value growth.

“This pattern holds when 2025 trade dynamics are excluded, consistent with a vent-for-surplus mechanism driven by excess capacity, not a tariff-induced diversion story,” it said.

But, the analysis also “suggests that while excess supply pressure was concentrated in weak-demand sectors pre‑2025, from 2025 onward, pricing weakness appears to become more generalized across the export basket” – which is in line with a wider demand shock around last year’s tariffs.

(Sophie Kiderlin)

*****

EARLIER ON LIVE MARKETS

AS GOOD AS IT GETS? MARKETS UK GDP SURPRISE CLICK HERE

STOXX 600 ON THE RISE CLICK HERE

EUROPE BEFORE THE BELL: BUILDING MOMENTUM CLICK HERE

AI RALLY POWERS ON, TRUMP-XI SUMMIT TAKES CENTRE STAGE CLICK HERE