An Outlook for US-EU Trade War: Politics and Economy

In the mid-17th century, Thomas Hobbes used the phrase “war of all against all” to characterize the condition of society before the invention of social contract and the state. Today, the entire planet is aware that the Oval Room occupier is a Hobbes enthusiast and as such views present-day world politics in a similar way. For the current incumbent, interstate relations are full of dangers and antagonisms, while having confrontations with other states is seen as the only way to defend the US national interests. Luckily, Donald Trump, unlike most of his predecessors, has not yet unleashed new military conflicts involving the use of weapons and human casualties. But his passion for trade disputes and full-scale economic wars has surpassed anything known before and will certainly go down in history.

In a modern world economy, the emergence of a multipolar setup with several leading states at the head has gone much further than a comparable process in the military and political field. China has joined the three traditional Cold War poles (US, Western Europe, Japan), whereas one of these (Japan) has practically vanished. Relations within the Washington-Brussels-Beijing triangle form the axis of the world economic system, with the entire global economy revolving around it. These three players account for 45 percent of world commodity trade, for which reason any hitches in their relations would immediately affect the state of global trade. While previously, the US unrestrictedly used both the “stick” and the “carrot” to compel its allies-cum-opponents to play by its rules, today this proves increasingly more difficult with regard to both China and the European Union.

China is firmly resisting all US attempts to open its domestic market to overseas goods and impose voluntary restrictions on its exports to the United States. For this reason, there is no end in view to their two-year-long trade war. On the contrary, the conflict is growing more intense. For the time being, Beijing seems to be the victim, with its economy slowing down after almost 40 years of fast growth, its national currency seesawing, and so forth.

From Economic War to Hot War? US, China and the End of Strategic Ambiguity over Taiwan
Glenn Diesen
The US has approved an 8 billion dollar sale of advanced F-16 fighter jets to Taiwan, which signifies an economic conflict transitioning into military confrontation. The weapon sale is also indicative of the US abandoning its strategic ambiguity over Taiwan’s status by incrementally withdrawing from yet another key international agreement – the One China policy.
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The planet’s second economy in nominal terms, the EU is simultaneously America’s biggest economic partner. Their trade amounted to $1,258.4 billion in 2018, or 70 percent more than the amount of the US-China trade ($737.1 billion). The trade balance is currently in favor of the Old World, with European sales in the US exceeding US sales in Europe by $100 billion. But the important thing is that the United States exports to the EU three times more than it does to China ($574 billion vs. $179 billion). Therefore, a new phase in the trade war against the EU that Donald Trump has recently announced in a tweet is tantamount to a shot in the foot. Why? I will identify just three reasons that seem of principal importance from the politico-economic point of view.
US Trade War with France on the Horizon
Alexander Losev
If politically, the countries of the European Union are still formal allies of the United States, then on the global market, the Europeans are no longer partners with whom Washington needs to cooperate, but rivals with whom it has to compete.
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First, America’s current economic predominance is based on political stability, efficiency of its economic institutions, as well as on capital exports accompanied by technology transfers and inclusion of client companies in global VA chains. In terms of its exports in 2018 ($1.664 trillion), the US was inferior to China ($2.494 trillion) and the European Union ($2.215 trillion) and was only slightly ahead of Germany ($1.557 trillion). By declaring trade wars on more powerful rivals, the US is not only running the risk of losing in view of its relative weakness as a trade power, but also (and most importantly) of letting its appeal slip as the safest place around the world economy and a guarantor of its enduring liberalism. If foreign investment flees from the US and starts dashing around the world in search of a refuge, the destructive effect of this about-face will be felt by all economies on the planet.

Second, the trade conflict between Washington and Brussels will bring about the collapse of the WTO and other global and regional pacts that vouchsafe the liberal nature of the global economy. This threatens to plunge multilateral cooperation formats (multilateralism) in profound crisis, something that President Emmanuel Macron of France urged to avoid ahead of the G7 summit in Biarritz in August 2019. In actual fact, the world is tottering on the brink of the “war of all against all,” whose culmination in the epoch after the Thirty Years War (1618−1648) marked the beginning of a new stage in the history of Europe that paved the way towards progress and democracy. Today, the US and the EU are the principal defenders of the market economy on a global scale. If it is rejected, years will pass before a new model takes shape and it is hard to expect that this unknown entity will be as effective as the still existing postwar arrangement that ensured an unprecedented economic growth throughout the world.

A Post-America Future for the WTO?
Stanislav Tkachenko
The entire edifice of American prosperity presently relies on the fact that no one has yet seriously challenged Washington's unilateral moves. The only players capable of doing so at the moment are the EU, China and, under certain circumstances, BRICS. The leaders of these states and associations are currently only contemplating the long-term consequences of America’s potential fall from its economic Olympus.
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Third, all economic decisions have political consequences, some of which are difficult – or outright impossible – to forecast. Quite a few experts believe that there is a direct link between Black Tuesday (the New York stock exchange crash on October 29, 1929) and the beginning of WWII on September 1, 1939), and their opinion is not to be disregarded. A trade war between the US and the EU will have significant consequences that are difficult to foresee today. Almost inevitably, it will strengthen China’s positions in the world and primarily in Europe itself. Currently, the US is regarding the PRC as its chief trade opponent. The more large-scale will be the error committed by Washington, if it decides to open a new (European) front in its trade war against the whole world. A world economic crisis is inevitable in this case, but there is every reason to believe that China will be less affected than the US and the EU, because its integration in the global economy is not as thorough as theirs, while the PRC authorities have far greater opportunities for hands-on control of the national economy.

A pertinent question to ask in conclusion is what Russia is going to gain or lose if trade differences between Europe and the US get intensified? From a purely economic point of view, a conflict between Washington and Brussels is certain to rebound against the Russian economy by virtue of its dependence on trade and economic ties with the EU. Russia’s “pivot to the East” looks good at the level of official statements, but it will take another several decades before it comes into its own. The EU is a major trade partner for Russia already now and it would be unwise to wish that it sinks into a profound crisis. But seen in a wider scheme of things, the growing trade differences between Europe and the US are already pushing Brussels towards Russia. Moscow has for decades complained of the EU’s inadequate international “uprightness” occasioned by its dependence on the US. Today, this “uprightness,” which was so coveted by Russian diplomacy to wit, the ability on the part of Brussels/Berlin/Paris to take independent decisions without looking back at Washington, may become a reality. This will signal a new start when it comes to Russian-European relations. There is every reason to hope that they will be based on equality and mutual respect and, by this virtue, will prove more stable and mutually beneficial.

Suzerain-Vassals Relations: How Trump Shapes His European Policy
Andrei Korobkov
Last week, Donald Trump demonstrated the stark contrast between the way he talks with Vladimir Putin who, albeit an opponent, is still the head of a great power, and the way he talks with European leaders, seen as vassals. At a meeting with Jean-Claude Juncker on July 25, the US president called a spade a spade once again and sent Europe a clear message that the western alliance is not a union of equals anymore. No matter how the trade war ends for Europe, the rules of the game have changed, said Andrei Korobkov, Professor of political science at the Middle Tennessee State University, in an interview with valdaiclub.com.
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