Stuck in the middle
Trump’s reckless trade war brings dilemma to European Union
US President Donald Trump said on Thursday he had asked the US Trade Representative (USTR) to consider slapping $100 billion worth of additional tariffs on China, a dramatic move that threatens to undermine the global trade system.
“In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs,” Trump said in a statement on Thursday (US time).
As staunch supporters of free trade and multilateralism, China and European countries would bear the consequences of US trade protectionism if Trump topples the global economic order, experts say.
Divide-and-rule tactics
Resorting to protectionist moves the likes of which haven’t been seen in decades, Washington announced last month that it would impose a 25 percent tariff on steel imports and 10 percent on aluminum imports.
The White House then decided to grant the EU and six other economies a temporary exemption from the tariffs before Trump signed a memorandum that would impose tariffs on Chinese imports worth up to $50 billion.
The concurrence was “interesting,” said Andre Sapir, a senior fellow at Bruegel, a Brussels-based think tank specializing in economy and finance.
“In a sense, the message that was given to the European countries is that, you know you are exempted from the severe measures, I’m taking tough measures against China on steel and other products ... I want to know on which side [you are],” said Sapir.
After signing the memorandum, Trump called the leaders of France and Germany to discuss cooperation on trade policy toward China.
During their conversation, Trump and German Chancellor Angela Merkel discussed “joining forces to counter” China’s economic practices and alleged “intellectual property theft,” said the White House.
But a German government statement said Merkel called for a dialogue between the EU and the US on trade policy, taking into account the rules-based international trade system. Meanwhile, in his phone call with French President Emmanuel Macron, Trump also discussed trade practices between the US and the EU and the “next steps” in addressing China’s trade practices, while reaffirming the cooperative relationship between his country and its two important allies, according to the White House.
“You know we are not going to be a player [in Trump’s game]. The only way we can be a player is by leading the coalition of countries to say that the world trading system, the rulesbased system, is our primary objective,” Sapir said.
Trump was obviously trying to get Germany and France to side with him. In fact, he was using “divide-and-rule tactics,” said Wang Yiwei, an expert on European studies at the Renmin University of China in Beijing.
Selling snake oil
However, due to Trump’s increasingly isolationist policy, the US is no longer Europe’s go-to guy. What’s more, his attempt to sell his European partners on the so-called “China trade threat” is nothing short of “selling snake oil,” according to some European media.
“Trump questioned the global trading order after the Second World War. And he wants to go back to nineteenthcentury nationalist protectionism,” said the DPA, a leading press agency based in Germany, in an analytical report published after Trump’s phone conversation with Merkel.
“If they [European countries] play games with the Americans at the expense of free trade with China, Europe would have practically taken over Trump’s protectionism,” the DPA said.
The DPA also said that for the EU, taking sides in the trade dispute can be likened to a tightrope act. The agency also said that on the one hand, Merkel wants to engage in dialogue to prevent an escalation and a trade war. On the other hand, it said, she emphasizes that Europe will not let itself be blackmailed by Trump and will fight for a continuation of the internationally agreed trade rules.
A bilateral agreement between the EU and the US would “enable Trump to drive a wedge between the EU and the other WTO members,” said Gabriel Felbermayr, director of the Center for International Economics at the Ifo Institute for Economic Research, a Munich-based institution.
It would be better to tackle the existing problems with negotiations rather than with unilateral measures, and “small and poorer countries would be isolated and left behind by such an agreement, and would stand hardly any chance of fighting the USA’s illegal tariffs,” Felbermayr said.
Irrational move
The Trump administration early last week proposed a 25 percent tariff on 1,300 Chinese industrial and other products. In response, China released a list of similar proposed duties on US imports worth $50 billion.
“It is no longer the United States, but China that has become Europe’s most important trading partner,” said Felbermayr.
As of 2016, the EU had been China’s largest trading partner in a row for 12 years, while China was ranked as the EU’s second-largest trading partner for 13 consecutive years.
“In a world of great uncertainties, a stable China-EU relationship is an invaluable asset,” said Zhang Ming, head of the Chinese Mission to the EU.
“China and the EU, as major members of the WTO and comprehensive strategic partners, should take a clear stance against protectionism, jointly preserve the rules-based multilateral trade order and keep the global economy on a sound and sustainable track,” Zhang said in a signed article published on the Politico website on Wednesday.
“This is a joint responsibility. China and the EU must act together to make that happen,” Zhang said.