While the China-U.S. trade negotiations have yet to reach the final agreement, trade tensions between the EU and the United States have begun to erupt. The U.S. Trade Representative Office announced on April 8 that the United States will impose tariffs on EU goods. Its initial list covers everything from airplanes to fish, dairy products, binoculars, olive oil and wine. Earlier, the United States said it was considering a US$11 billion retaliatory tariff on a range of commodities in response to the EU's illegal subsidies to aerospace companies. The World Trade Organization ruled last year that these subsidies have had an "adverse impact" on the United States.
The United States is resolute in renewing its trade war with the EU. The U.S. Trade Representative Robert Lighthizer said in a statement, “this case has been in litigation for 14 years, and the time has come for action”. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft,” he said. “When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted”.
After the U.S. announced that it would raise tariffs on EU products, Airbus shares fell 2.3%. A spokesman for Airbus said that there is no legal basis for the United States to adopt sanctions and that the EU has complied with the WTO's ruling. A source from the European Commission said the EU believes that the level of subsidies on which U.S. decisions are based on is exaggerated.
The United States and Europe have engaged in long-term litigation battles for the interests of their respective aviation giants. Currently, the EU is still waiting on the WTO's claim that the Boeing had received “beneficial rights” after obtaining billions of dollars in illegal subsidies in 2012. At that time the WTO believed that these subsidies had harmed the interests of Airbus. The WTO also ruled in March this year that the United States failed to fully comply with its previous ruling, which is to remove all illegal subsidies received by Boeing. The European Commission said on April 9 that the EU is preparing to retaliate. In the dispute with Boeing, “the determination of EU retaliation rights is also coming closer and the EU will request the WTO-appointed arbitrator to determine the EU’s retaliation rights”.
It should also be pointed out that the latest tariff sanctions imposed by the United States on the EU are not the full-fledged U.S.-EU trade conflict. The United States has previously threatened to impose additional tariffs on cars and auto parts from the EU. This tension has not yet been finalized. Some analysts say that the latest US tariff proposal is a "very dark cloud" for the already fragile European economic growth.
The escalation of conflicts between the United States and Europe on tariff issues is not beyond the expectations of Anbound scholars. Anbound’s chief researcher Mr. Chan Kung pointed out as early as 2018 that the military and political alliance between the United States and Europe does not mean that there will not be economic disputes. As long as U.S. President Donald Trump insists on America First, there will be frictions between the United States and Europe. Chan Kung emphasized that global competition behind the international trade war is dominated by Europe and the United States, not between China and the United States (Daily Economy, July 12, 2018, Vol. 5708).
In January this year, the Anbound research team also forecasted that the next public policy trend in the United States is to replicate the success of trade negotiations with China and to obtain greater economic advantages from Europe, Japan, South Korea and Canada. Europeans and Japanese will pay a price for their ambiguous attitude of the world's multilateral trade, even if it would be at a later time. According to history and the basic logic of the industry, one consequence that is likely to occur is that Europe and Japan may pay more than China. This is because comparing with China, the products and technology of these countries are far more competitive than the Chinese products and technology to the United States.
With the U.S.--China trade negotiations about to reach an agreement, the United States has begun to target the EU. The Trump administration has demonstrated its strength and persistence in trade issues. In Trump's view, trade friction is his economic, trade and diplomatic goal, and it is also the performance that he is concerned about the most. Judging from the ninth round of trade negotiations, there is a high possibility of an agreement between China and the United States. With the reduction of U.S.-China trade friction pressure, the U.S. government will be able to put more pressure on the EU. As a result, the world will fall into the three-sided trade frictions. Considering the economic volume, technological level, and trade level of the United States and the European Union, if the U.S.-European trade war breaks out, it will tear the global market apart.
Anbound researchers believe the possibility of such a result is high. Unlike China, which is one single country, the EU is a relatively loose multinational coalition and a bureaucratic entity with slower decision-making. Its decision-making and balance of interests will not be as rapid as China's, which is likely to delay the trade friction between the United States and Europe and may even anger the United States. In this regard, if China and the United States can give priority to resolving trade frictions between major powers, they will actually gain more space and more initiative in the changing world.
Final analysis conclusion:
The main axis of global trade competition is not the one between the U.S. and China, but the competition between Europe and the U.S. The focus of the global trade war is turning to competition in Europe and the U.S.
