German minister warns against trade war with China at G7 gathering

German Finance Minister Christian Lindner on Friday warned against entering into a trade war with China, amid a debate over possible punitive tariffs by the European Union on Chinese products.

Lindner said that EU countries must react to dumping and unfair practices but must not weaken free and fair global trade as a whole "because trade wars only have losers, they cannot be won."

Lindner made his remarks at a meeting of finance ministers from the Group of Seven (G7) wealthy democratic countries in northern Italy.

A possible joint response to China's industrial policy and how to deal with competition from subsidized Chinese exports is among the topics being discussed at the gathering, held in the resort town of Stresa on the shore of Lake Maggiore.

Last week, the United States imposed special tariffs on imports of electric cars, semiconductors, solar cells, cranes and other products from China.

The US has accused China of distorting competition through substantial state subsidies, allowing Chinese companies to undercut US competitors with artificially low prices.

China is also exporting large quantities of products to Europe, including growing numbers of electric vehicles.

Prior to the meeting in Italy, US Treasury Secretary Janet Yellen called for a clear and united front between the US and the EU against Chinese production overcapacity.

The EU is also currently investigating the extent to which China is distorting the market for electric cars. A decision as to whether it will impose punitive tariffs is still pending.

The Chinese Chamber of Commerce in Brussels recently warned of possible countermeasures by Beijing that could affect European and US car manufacturers.

The Kiel Institute for the World Economy (IfW), an influential German economic think tank, warned that the US tariffs could trigger a very unfavourable spiral of reactions and counter-reactions for Germany and the rest of the EU.

In addition to the US, France has also urged a joint response to Chinese competitors.

"The G7 must present a united front to defend their industrial interests," French Finance Minister Bruno Le Maire said at the meeting, noting that Chinese subsidies and production overcapacity pose a problem.

At the same time, however, he also emphasized that any form of trade war must be avoided: "China is our economic partner," said Le Maire.

Germany is now coming under increasing international pressure in the debate over tariffs. Many export-oriented German companies have substantial business interests in China.

Lindner said that Germany, as a successful export nation, has a vested interest in free, fair and open global trade.

"We are also heavily dependent on globally diversified supply chains," Lindner said.

But other countries must also have an interest in rules-based global trade, said Lindner. Further fragmentation of the global economy would only produce losers.

Lindner emphasized that dumping allegations against China must be objectively and very carefully examined. If so, then Lindner said joint action should be taken, including potentially through the World Trade Organization (WTO).