European companies are affected by the trade and technology war between the United States and China, while the European Union is preparing measures to reduce dependency on China. According to a new survey by the Bertelsmann Foundation, participating companies are well aware of geopolitical shocks, but few are preparing for future shocks.
Lack of Preparedness for Future Shocks
A survey of 228 companies active in Europe showed that the war in Ukraine has impacted 81 percent of participants or is expected to do so. However, only 10 percent of companies have taken steps to prepare for the possibility of similar events occurring in Taiwan, and 59 percent have neither taken specific actions nor have plans to do so. Jacob Gunter, one of the authors of the study, stated that companies are aware of the negative consequences of geopolitical impacts on their daily operations, but in practice, they do not take specific actions.
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Dependency on China
This lack of preparedness is also evident in companies' exposure to risks related to China. Only 24 percent of survey participants have a plan to reduce dependency on Chinese suppliers, and nearly one-third are considering strategic stockpiling of critical raw materials. However, China's export controls, especially regarding rare elements, have highlighted these dependencies. Gunter described this situation as concerning, stating, "It is astonishing that we are not seeing stockpiling or diversification in suppliers for items that are already identifiable."
Close to one-third of respondents reported negative effects from the trade and technology restrictions between the U.S. and China, and this ratio rises to about half among companies active in China. U.S. President Donald Trump and Chinese leader Xi Jinping are expected to meet this month, and China's suspended export controls will likely be back on the agenda.
The European Union is currently preparing tools to diversify suppliers and strengthen supply chains, aiming to reduce its trade deficit with China, which is about one billion euros a day. Trade Commissioner Maroš Šefčovič will visit Beijing in October, and if negotiations fail, actions may be taken by the European Union.
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