Home Europe U.S. Set to Open 2nd Trade War with Europe

U.S. Set to Open 2nd Trade War with Europe

Stockholm (Ekonamik) – The United States is set to trigger a full-blown trade war with Europe by imposing tariffs on billions of euros of European exports as of September 30, following a World Trade Organisation ruling last week giving president Trump a green light to retaliate for illegal subsidies granted to Airbus, the European aerospace giant.

The U.S. has prepared a list of EU exports worth a total of $22,7 billion from which it will pick and choose products to tax at different rates until it has equalled the illegal subsidies to Airbus that are still in place, the damage to the U.S. of which it estimates to stand at $11 billion.  The list includes products and luxury goods spanning everything from airplane parts, whiskeys and Dutch Gouda cheese, to French wines, Italian pasta and handbags.

Mr Trump is also considering tariffs on European auto exports that could be imposed in mid-November. EU officials fear that a new U.S.-Japan trade deal to be signed next week at the UN General Assembly in New York will embolden Mr Trump to go even further. Phil Hogan, the new EU Commission pick for trade chief (pictured), is likely to want to hit back hard, but it is not presently clear what European options are for the time being other than retaliation in kind on foods and wines.

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The EU is not expected to take countermeasures for the next six months, when the WTO issues a ruling in a Brussels dispute against American airplane producer Boeing which has also been found to benefit from illegal subsidies. The WTO is expected to rule in favour of Brussels, and the EU has drafted its own target list of $20 billion in American products.

It is a dubious proposition for Mr Trump to escalate a trade war with the European Union at the same time as there appears to be no end in sight to his trade war with China. Beyond the likely (further) impact on American jobs heading into an election year, the EU remains America’s largest economic and trading partner, with trade amounting to $1,260 billion in 2018. European sales in the U.S. exceed U.S. sales in Europe by €139 billion.

In other words, the U.S. has a trade deficit with both Europe and China. U.S. exports ($1,664 trillion for 2018) are inferior to both European Union ($2,215 trillion) and China ($2.494 trillion). Conducting trade wars against both runs the risk of further undermining the U.S. itself as a trade power, which in turn threatens investments in the U.S. economy.

In addition, an ongoing trade conflict between Washington and Brussels could threaten the existence of the WTO itself and further strengthen China’s hand on the global stage. If the U.S. pursues a trade war with Europe with the same intensity as its trade war with China, it will essentially be embroiled in a trade war with the world at large. China would be less affected than the U.S. or Europe, given its independence from multilateral institutions and because its integration in the global economy is less bound by mutual cooperation. A global economic crisis in this scenario is potentially immutable.

Think, Mr President.

Image: Phil Hogan, European Commission (2017) (Wikimedia Commons)

Glenn W. Leaper, PhD
Glenn W. Leaper, Politics Editor, is a political theorist, analyst, editor and writer. He completed his Ph.D. in Political Philosophy and Critical Theory from Royal Holloway, University of London in 2015. His research focuses on ideology, unaccountable structures of power and surveillance capitalism. He is also a communications consultant, speechwriter, interpreter and journalist. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in Literature and a BA in International Relations.

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