US President Donald Trump clearly believes that “trade wars are good and easy to win” but his intentions to hit steel and aluminum trade with tariffs have unleashed a strong urge to start off a tit for tat global trade war. The introductory 10% and 25% tariffs on aluminum and steel could “go up or down, depending on the country, and I’ll have a right to drop out countries or add countries”, says the US President. It does not come by surprise that the US’ foreign trade partners are desperately trying to secure waivers and special treatment.
For the time being, Mexico and Canada are safe and the EU and Japan are trying hard to get an exemption. Britain, who is leaving the bloc, is expected to start doing the same on its own soon. South Korea has in turn informed the US that potential tariffs could negatively impact the US’ efforts to negotiate a landmark nuclear deal with North Korea. In the meantime, the focus is on China, whose steel production seems to be the main driver behind President Trump’s move. Another layer to this looming trade war is the constantly changing mood of the US President. While China might be the foe today, it could be a friend tomorrow. The same applies for Europe – good friends one day but competitors another.
Having said that, the EU’s response to the tariffs has so far been nothing unusual. EU Trade Commissioner Cecilia Malmström has warned of retaliation such as by imposing tariffs on US oranges, tobacco, bourbon and motorcycles. There could also be European quotas or duties on imports of steel and aluminum to prevent metal shipments being diverted from the US to Europe. The tariff war could also be challenged at the World Trade Organization (WTO) and the EU is getting ready for this fight, including the efforts to secure waivers for its own businesses. However, the global war is certainly in no one’s interest especially since disputes over trade could easily spill over to other areas, which is not desirable given the current global climate.
Therefore, the international community needs to push the White House on the tariffs. It is also a moment to be proactive and give a boost to the increasingly fragile global trading system. The recent G20 meeting in Buenos Aires offered a first opportunity for coordinated commitment to address trade protectionism and dissuade the US from levying tariffs. German Chancellor Angela Merkel’s phone conversation with Chinese President Xi Jinping on strengthening multilateral trade cooperation is also a welcome move.
The White House is no longer the only show in town. Around the world, countries are undertaking steps to override the US, such as when Japan is now pushing hard for securing the Trans-Pacific Partnership (TPP) trade accord despite US withdrawal from the deal, thus cementing Tokyo’s leadership on trade. Asian countries are also moving ahead with somewhat less ambitious but still-important Regional Comprehensive Economic Partnership (RCEP) and the EU-Japan trade deal is almost finalized.
The EU should work with like-minded partners around the world to buttress the WTO’s dispute system despite the US’ decision to block the appointment of judges, a move which could bring the organization to a standstill. Worries that the US offensive on dispute settlement could do harm to the multilateral trading system have also prompted a few WTO members to look for alternatives for settling disputes. Donald Trump can achieve his trade war in the end. However, with America withdrawing and the world moving forward, the EU can lead and maintain the current global trade system whether the US wants to play the ball or not.
As Trump Plays with Fire, EU Should Lead on Global Trade – Op-Ed by Shada Islam – Friends of Europe.