US-EU conflict drives world trade war

The US government’s simultaneous accusations against China and the EU regarding trade have had global repercussions. Trade between China, the EU and the US is 80 percent of global trade. If these three markets are involved in trade conflicts, it will certainly be a huge trade dispute of global scale.

From a mainstream Chinese perspective, the China-US trade dispute is China’s most pressing problem at the moment. China is the trade rival that the US wants most strongly to hurt. China is also the US’ foremost strategic rival in technology and overall national strength. Given the recent “intensity” of the China-US trade dispute, the view above sounds reasonable. This first round of the China-US trade war is worth $100 billion. Trump is even threatening to escalate and impose tariffs on $400 billion of Chinese imports.

In contrast, the mutual trade sanctions imposed by the US and the EU at present only amount to a few billion dollars, much less than the sanctions in the conflict between the US and China. The US has also clearly shown that it sees China as its foremost strategic rival while Japan, the EU and other major trade blocs are US allies. For this reason, many in China fear that Europe and Japan will stand behind the US amid this China-US trade dispute, awaiting the chance to take advantage of China.

However it is very important to understand that the trade dispute is but one aspect of global competition, and the axis of this conflict is not China versus the US, but the US versus Europe. Since its founding, the US has been in conflict with European powers. The two World Wars were also fought along this axis of Europe-US competition. China and the US certainly have ideological disputes, but in the present peaceful era of globalization, ideology is mostly used for posturing, and used to make friends. However friends also compete with each other. Military or political alliances do not mean that economic conflicts are not there. As long as Trump insists on its “America First” strategy, he will see all that effort and money spent on behalf of its allies as bad business. Trump asked its NATO allies to increase their military spending. He said joint war games with South Korea are “provocative” and “tremendously expensive.” That shows that alliances do not count when talking about economic issues.

From the perspective of an economic and technological competition, the threats that China, Europe and Japan represent to the US are all very different. Even though the US sees China as its foremost strategic threat in terms of national security, in technological terms China is still a student. It is not China, but Europe and Japan, who could become a serious competitor to the US. Trump understood this very early, and will sooner or later refocus on how Europe and Japan have been “taking advantage of the US,” and how to fix that situation.

Looking at bilateral relations, the economic dispute between the US and Europe is starting to become political. A good example is the Nord Stream 2 project. The project would build two natural gas pipelines from Russia to Germany, across the Baltic Sea, with a capacity to deliver 55 billion cubic meters of gas per year. The project has already received approval by Germany, Finland and Sweden. Denmark has also issued approvals to related companies. But Sandra Oudkirk, US deputy assistant secretary of state for energy, has said the project raises US intelligence and military concerns.

From the attitude of the EU we see that, even if unwilling, they are preparing to fight a trade war with the US. All European countries are now looking at a greater threat – whether the US will use its national security regulations to investigate their auto imports. According to EU figures, this investigation could end up targeting up to $58 billion in automobiles and auto parts from EU manufacturers.

Even though China appears to be the main target of the trade war started by the US, a careful look at the international situation shows that conflict between Europe and the US is the real driver of world trends. Present trends show the feasibility of a new “one plus three” paradigm arising, and that a global trade war has just begun. China should use clear judgment to deal with this situation.

Even though China appears to be the main target of the trade war started by the US, a careful look at the international situation shows that conflict between Europe and the US is the real driver of world trends.