Conflict in Ukraine could affect Chinese exports

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In February, before the conflict broke out, the consumer price indices of European countries were already on the rise. In Germany, the CPI increased by 5.1% compared to February 2021, in the United Kingdom it increased by 6.2%, while in France it increased by 3.6%. After the outbreak of the conflict and the imposition of sanctions against Russia, their CPIs soared again.

This is particularly bad news for ordinary Europeans because their tax rate is rather high and ordinary people’s after-tax income is barely enough for daily consumption. Worse, many European governments were already subsidizing local populations and are no longer in a position to increase subsidies. If high inflation continues, social crises could emerge.

In terms of energy, Europe is heavily dependent on Russia. Many EU members are trying to find alternatives to Russian oil and gas, but other suppliers are reluctant to increase production because they fear that once sanctions are lifted in the future, they will face a surplus of production.

The United States and the European Union are discussing so that the first ensures the energy supply of the second in the next two years, but no one dares to increase production by too high a percentage in a short time.

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