What’s the feeling when a guy puts a gun to your head in a business negotiation? In talks on steel and aluminum tariffs, the European Union (EU) feels exactly this way with an overbearing US. After rounds of tough negotiations, Washington ultimately agreed to exempt the EU from steel and aluminum tariffs, which, however, will expire on May 1, pending further discussions.
Steel and aluminum trade accounts for a large proportion in the US-EU trade volume. A trade imbalance has perennially existed, followed by frequent negotiations. But due to the complexity, it’s difficult to completely solve. In this case, it is unlikely to address the conundrum within less than 50 days. European Commission President Jean-Claude Juncker said it was impossible to reach agreement by May 1.
In the eyes of many European leaders, the temporary reprieve by the US government is not merely insincere but constitutes a threat. Belgian Prime Minister Charles Michel said in indignation that Washington was threatening the EU to force concessions. “I have the impression that the US leader wants to negotiate with the European Union by putting a gun to our head,” Michel said.
French President Emmanuel Macron warned the US at a news conference: “We talk about everything in principle with a friendly country that respects WTO rules. Nothing should be addressed when it is with a gun to your head.”
During the EU’s spring summit in late March, the European Council denounced the White House’s tariff policy, saying the Trump administration was gravely damaging WTO rules and the EU would take countermeasures if the US still acted willfully. The EU announced a list of US products worth some 2.8 billion euros ($3.45 billion) it will subject to import tariffs and the duties could mount as high as 25 percent.
To get instant results, the EU plans to first take on “politically sensitive” states. Once the US wages the trade war, the EU will impose retaliatory tariffs on bourbon whiskey produced in Kentucky, hometown of US Senate Majority Leader Mitch McConnell, as well as punitive tariffs on Harley Davidson motorcycles from Wisconsin, home of Paul Ryan, Speaker of the US House of Representatives. Both the bourbon whiskey and the Harley Davidson motorcycles are exported to EU member states. When such states are stricken by countermeasures, they will wield pressure upon the White House.
Since Trump took office, the US and the EU have witnessed increasing divergences. Washington quit the Paris climate accord, asked its EU allies to spend more on defense, moved the US Embassy in Israel from Tel Aviv to Jerusalem, all of which the EU firmly objected to but kept restrained to maintain trans-Atlantic relations.
The EU’s patience may be exhausted as it realizes that by yielding to Trump, it will not secure its own interests but only make Trump more insatiable. As an important actor on the world stage, the EU can no longer tolerate US bullying and intimidation but must say “no” to the US, fight for its own interests and defend international rules.
The international consensus on free trade is mainly based on two assumptions. One is comparative advantage, in the case of which as long as different countries have different comparative advantages, they will give full play to their own advantages and profit through trade. The other is win-win cooperation, where all countries try to create a win-win scenario via cooperation and observation of international rules.
Apparently Trump approves of neither. In his eyes, international trade is a zero-sum game and seeking US interests is the basic rule.
Historical experience shows that the world economy has prospered in the post-World War II era partly as a result of the common effort of the international community to create conditions for trade liberalization and to resist protectionism.
The Trump administration’s intention to secure domestic jobs and protect less competitive industries through trade protectionist means is likely to incur a trade war and countermeasures from affected countries, consequently harming competitive US industries.
According to a study of the Organization for Economic Co-operation and Development, trade protectionism will cause more job losses than the number it intends to secure. Washington will ultimately meet its Waterloo in this trade war.