The Significance of the EU and U.S. Trade War and What it Could Mean for the Future

by Yashaswi Bista

Photo Credit: 75CentralPhotography

Tensions between the U.S. and the EU have been volatile over the past years because of President Trump. Unless both the EU and the U.S. would like to see their economic power diminish and the face of the global market change forever, these relations need to improve. The EU agrees, and would like to see these relations improve, but some doubt that this could ever happen as tensions still run high from the 4-year transatlantic tariff war (a war concerning countries on both sides of the Atlantic over taxes placed on one another’s exports or imports) with Donald Trump. 

The transatlantic trade war first started on April 20, 2017 when the U.S. announced an investigation into whether steel and aluminum imports from the EU, or anywhere else, compromises national security. Relations only worsened when Trump began to make damaging Tweets, such as, “trade wars are good” on Twitter. Then the U.S. started placing more and more tariffs (a tax or duty to be paid on a particular class of imports or exports) on EU products and goods, angering the EU and further deteriorating the relationship between them. A very significant example of a U.S. tariff imposed on the EU that caused a great amount of conflict are  the metal tariffs, which Trump imposed on the grounds of national security. Essentially, this meant that Trump believed that EU metals were a threat to U.S. security and decided to impose tariffs on them to compensate for the money lost by the U.S. when searching them. With the EU facing this loss, they pushed for the World Trade Organization (WTO) to investigate Trump’s actions because the EU believed that this was a baseless accusation against them. However, the United States resisted and claimed that their tax imposition was allowed under the WTO’s national security exemptions, which states that a country can take any action which it considers necessary for the protection of its essential security interests. The anger the EU feels has been expressed through retaliation by imposing higher tariffs on U.S. planes and agricultural goods. European officials have stated that they have only imposed higher tariffs to counterbalance the tariffs the U.S. has imposed over the European Union. Dutch Trade Minister, Sigrid Kaag, hopes that the U.S. and other countries will not see this as contradictory, but rather allow the U.S. to understand what the EU went through when the U.S. imposed higher tariffs on the EU goods.  

This deteriorating relationship between the U.S. and the EU has become dangerous when considering the global market as a whole. This is because China continues to rise in economic power while the EU and U.S. keep weakening one another’s economic power. The Trump administration has provoked Europeans with higher tariffs on their products and imports. As the U.S. and EU continue to fight, China’s commercial aircraft manufacturer, COMAC, has become more and more significant in the global market. Although the COVID pandemic has affected air travel dramatically, stopping China from joining the air travel competition would still require a collaborative effort between the U.S. and the EU. Maximizing free trade with Europe would also help the U.S. to face fewer problems than they would when working with low wage countries. Working with lower wage countries causes conflicts over the health and safety of those workers as well as the safety of the goods and products, while working with the EU eliminates these concerns. 

Many continue to hope that relations can be renewed and mended as there are many benefits, but it would require a lot of effort and collaboration between both states as they both continue to provoke each other. For instance, in July 2020, the EU was preparing to impose sanctions on the intellectual property of some major U.S. companies, such as Google. These sanctions are to be called the Digital Services Act, which is to come out in December. Many European political parties supported this as a way to fight back against the U.S. However, some experts disagreed with this idea because they feared that the U.S. could become even angrier and more aggressive. The Director of the ECIPE think tank (The European Centre for International Political Economy) said, “tariffs on Bourbon and Boeing is one thing, but cross-retaliation against copyright and religious symbols like trademarks is a whole different level of warfare”. EU officials are said to still be writing up a list of potential U.S. companies they want to fight against and impose sanctions on. The companies are yet to be revealed, but would most likely include big tech companies like Facebook and Apple. Many people have been distrusting these companies with their privacy as they are U.S. companies, and the EU believes that with this act European citizens’ privacy from the U.S. would be better protected.

Further angering the U.S., the WTO (World Trade Organization) has recently ruled that the EU can place tariffs on 4 billion dollars worth of U.S. products. This ruling could further escalate tensions between the U.S. and the EU. The EU hopes tensions between the EU and the U.S. will not rise too much, but they feel that, in some ways, they are forced to place tariffs on the U.S. The European Commission vice-president in charge of trade has said, “our strong preference is for a negotiated settlement. Otherwise, we will be forced to defend our interests and respond proportionately”. In April 2019, the WTO had also ruled against the U.S. by ruling that their tariffs on the EU’s Boeing were illegal. Boeing is to benefit from tax breaks of about 6 billion dollars, but it is unknown yet if they are going to receive the money or not. Many hope that this alliance with the U.S. and the EU may occur in the near future, as this war has caused both the U.S. and the EU to lose a lot of money. Only when either the EU or U.S. steps back and stops placing tariffs on the other can peace be restored.

Much is unknown about whether the U.S. and EU will ever end the trade war, but it seems highly unlikely with what has happened in the past few years. The EU targeting U.S. companies makes this all the more difficult. The rulings against the U.S. will also make it difficult for the U.S. to gain power over the global market, and will perhaps they will even lose some power. It is also likely that as the EU and U.S. fight against each other that China will gain more power over the global market. Consequently, the worsening trade war could change the global market forever if nothing to improve it occurs.

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