Changing Trade Realities?: The EU in the US-China Trade war
By admin July 6, 2018

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The Trump administration is preparing to enforce tariffs on $34 billion in Chinese goods, and China has claimed to retaliate with tariffs of an equal amount in U.S. exports. If Trump’s threats turn out to be true, this could mark the beginning of an escalating trade war. Businesses within the European Union are closely watching the U.S. and China clash over trade, as the war presents an enormous threat to the economic upswing that has helped the EU get past its financial crisis.


European businesses may benefit from Chinese businesses being excluded from the American market. However, benefits would only be realized in a few companies or sectors. Several European companies will reportedly incur losses as they both produce in and sell goods to the U.S. and China. For example, if China imposed tariffs on American auto makers, the effects would hit German carmakers Daimler and BMW since they both produce vehicles in the United States and export them to China.


Daimler has already talked about lowering its outlook for profits, citing higher than expected costs from the new tariffs. BMW also expressed concern that tariffs would make it difficult for it to sell its products in China. Producing its vehicles in Spartanburg, South Carolina, BMW warned that the tariffs could be “potentially leading to strongly reduced export volumes and negative effects on investment and employment in the United States.” If Trump pushed the Chinese into a trade agreement aimed at lowering the U.S. trade deficit, Europe may also be adversely effected as this could lead to additional sales in U.S. goods to China at the expense of European competitors.


Amid the chaos, China is pressuring the European Union into issuing a strong joint statement against President Donald Trump’s trade policies at the Sino-European summit in Beijing on July 16-17. In meetings in Brussels, Berlin and Beijing, senior Chinese officials and diplomats have proposed to create an alliance between the EU and China which offers more access to the Chinese market as a gesture of goodwill. China has also pitched itself and the EU to introduce joint action against the US at the World Trade Organization. However, the EU is hesitant to be on board, rejecting the idea of allying with Beijing against Washington all together. Irrespective of the new tariffs, the EU’s trade surplus with the U.S., worth $115 billion in 2017, is unlikely to decline much in the coming years which means that trade topic will remain relevant for the foreseeable future.



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