June 15, 2020

Trump’s Transatlantic Trade War

After some hostile moves during the worst of the COVID-19 crisis, Trump is now threatening more tariffs on Europe in the name of Maine lobster.

That’s led the European Union, which already has its hands full trying to rebuild trust among its own members, to give up pretending a positive trade breakthrough with the Americans is on its way. After a year of fraught talks over a very limited trade deal, Phil Hogan, the EU’s top trade official, last week blamed the U.S.’s “preelection phase” for talks stalling. While not a shock — the chances of a deal were once put at fifty-fifty — Hogan had been optimistic about “refreshing” transatlantic ties as recently as January.

Even if the far bigger economic pain right now is virus-related, it’s still bad news for a transatlantic market that’s historically enjoyed the world’s deepest economic relationship, covering the equivalent of one-third of global GDP, according to Bart Oosterveld at the Atlantic Council, a think tank.

But as Europeans weigh how hard to hit back, depending on an expected go-ahead by the World Trade Organization, they should bear in mind the possibility that —  judging by Joe Biden’s poll lead — the key instigator of these tariff spats could be out of the picture in just a few months. As bad as things look now, there is hope that ties can be repaired.

A tariff truce would be low-hanging fruit for any future U.S. administration wanting to reengage with European allies. Trump’s taxes on European goods have done little to extract meaningful concessions or close the bilateral trade gap. Beyond the risible language, his threat to hit German cars with tariffs in the name of “national security” has failed to bully Europe into accepting perennial American trade demands such as opening up access to its agricultural market. The menace has alienated allies while receiving no noticeable support from domestic automakers in the U.S.

This isn’t to say that all trade tensions began with Trump and will end with his presidency. Even under Barack Obama, Europeans and Americans found themselves in deep disagreement on trade norms, extra-territorial sanctions and the regulation of Big Tech — U.S. companies that Washington will probably want to protect, whoever’s in charge. Voter consensus has shifted against free-market globalization in both continents, making a big trade deal less likely than ever. Sino-American competition will likely keep pushing Europe to assert itself on the world stage.

Still, it would serve Europe to keep an eye on what could change for the better in its U.S. relationship. Perhaps later this month, when the WTO is expected to approve tariffs that the EU can impose in the fight over aircraft subsidies, the bloc might signal its hope for a thawing of relations by deferring punishment to a later date.

(Source: Bloomberg Opinion)