Tensions between China and Europe are escalating towards a potential trade war, cautioned the head of a European business lobby group on Wednesday. Jens Eskelund, President of the European Chamber in China, described the situation as a “slow-motion train accident,” emphasizing the urgent need for increased dialogue between European and Chinese leaders to avoid further deterioration in relations.

Speaking at a meeting of the chamber’s South China chapter in Guangzhou, Eskelund highlighted the risk of unproductive decoupling if concerns about trade were not addressed promptly. He stressed the necessity for leaders to come together and find solutions to prevent the situation from spiraling into a full-blown trade conflict.

The warning comes in the wake of German Chancellor Olaf Scholz’s recent visit to China, during which he conveyed European apprehensions about Beijing’s investment policies and advocated for enhanced market access. Meanwhile, the European Union has initiated several investigations into allegations of Chinese manufacturers dumping subsidized goods, such as electric vehicles, in European markets.

The concern over trade tensions extends beyond Europe, with U.S. Treasury Secretary Janet Yellen also raising issues about China’s investments in advanced manufacturing during her recent visit to the country. According to Yellen, China’s dominance in clean energy goods manufacturing creates an unfair playing field.

Despite these challenges, Eskelund expressed optimism about the recent high-level discussions between European and Chinese officials. However, he emphasized the importance of addressing underlying issues to prevent further escalation.

As discussions continue, thousands of foreign buyers are currently attending China’s largest trade show, the biannual Canton Fair, underscoring the country’s pivotal role in global supply chains. Eskelund stressed that China’s vast manufacturing scale necessitates a nuanced approach, recognizing that even small changes in Chinese manufacturing can have significant global ramifications.

The evolving dynamics between China and the EU will undoubtedly shape the future of international trade, underscoring the need for constructive dialogue and collaboration to mitigate potential conflicts and foster mutual prosperity.