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Main » 2019 » August » 23 » Trade war with Europe will be more large-scale and destructive than Washington's trade dispute with China
Trade war with Europe will be more large-scale and destructive than Washington's trade dispute with China


Experts told CNBC, that the United States has more to lose from a full-scale trade war with the EU than from the current conflict with China. 

President Trump continues his harsh rhetoric against the EU, despite the fact that he concentrated on Chinese tariffs in recent months. The administration must decide in November whether to impose duties on one of the most important sectors of European production: cars.



Already been introduced tariffs on European steel and aluminum, which has led to the fact that the unit has introduced a fee of 25% on US goods worth $ 2.8 billion in June 2018. Also continuing dispute as Airbus and Boeing, but experts believe that broader disagreements with Europe will be more devastating than the current trade dispute with China. The leaders of the G-7, the seven largest economies in the world, need to discuss issues of global trade at a meeting in France later this week. 

"EU-US trade is of great importance on a global scale. Today it is the world's largest bilateral trade flow, "- he told CNBC email Florian Hansen, an economist at Berenberg.

"With the export and import of goods and services, bilateral trade between the US and the EU in 2018 has exceeded the trade between the US and China by more than 70%", - he added. 

Data from the US Chamber of Commerce show that in 2018 the United States imported goods from the EU amounting to $ 683.9 billion and US $ 557.9 billion from China. However, if we look at the United States exports, it reached $ 574.5 billion in Europe and only $ 179.2 billion in China. These figures include both goods and services. 

"In 2018 the US exported to the EU is more than three times higher than in China," - Hens said, adding that the region can cause a severe blow to Washington. 

For its part, the head of the European Commission on Trade Cecilia Malmstrom said that they did not intend to impose tariffs, but will do so if the United States will inflict the first blow.

"The rules of international trade, which we have developed over the years together with our American partners, can not be violated without a matching response from our side," - said it in June 2018. Since then, every time the US threatened to impose additional fees. 

Brussels has developed various product lists, to show how he can strike back at the White House.

US-EU economy is experiencing difficulties

Both the US and Europe can not afford a trade war at this stage. "While trade war between the US and China is beginning to have an impact on the state of the economy, some of these effects have been balanced by a favorable economic climate," - said Fredrik Erixon, director of the analytical center ECIPE. 

Data released in late July showed that in the second quarter, the euro zone, which consists of 19 countries that use the euro, rose by only 0.2%. This was lower than the 0.4% in the first quarter of the year. As a result, the European Central Bank (ECB), which controls monetary policy in the region, plans to announce additional stimulus at the end of the summer.

The US economy grew at an annualized rate of 2.1% in the second quarter of the year - by 1 percentage point less than in the previous quarter. The US Federal Reserve announced in July, its first decrease in rates. Speaking to the US Senate in mid-July, the Fed chief Jerome Powell said that "cross the risks, such as trade tensions and concerns about global growth, putting pressure on economic activity and prospects."

US multinational corporations in danger

Eric Jones, professor of international political economy at Johns Hopkins University, explained that the business model of transnational companies are at risk because of the potential US-EU trade war. 

"Most of the EU-US trade takes place within firms rather than between them. When tariffs are established between the United States and Europe eventually to raise prices to consumers in both cases, as is the case with the United States and China, but has also violated plu profitable business models for large multinational corporations ", - he said. 

"Since many, if not most of these large multinationals are American, it is even more slow down the US economy," - he added.

According to the European Statistical Office, the main US goods exported to Europe in 2018, were the engines, aircraft and related equipment, as well as medicinal and pharmaceutical products. With regard to the import of goods, the United States bought from the EU mainly cars, as well as pharmaceutical and medical goods. 

"A trade war between the US and Europe will be more complicated than a trade war between the US and China, because it would weaken the US transnational corporations, reduce the size of the markets, which can access the American firms, and creates an incentive for US companies to give up their foreign assets and thus lose the international competition "- Eric Jones said in an email.

"In other words, this war will destroy all the structural advantages that were created by the president of the US administration after the Second World War", - he added. 


WELTRADE analyst



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