The start of the trade war between the United States and China, the world’s largest economic powers, came after US President Donald Trump decided on March 22 to impose customs duties of up to 50 billion US dollars on Chinese goods.

Following that decision, Trump signed a memorandum under Section 301 of the US Trade Act of 1974, in which the US Trade Representative demanded the application of those tariffs to impose tariffs in response to unfair trade practices by EU and China for years as Trump has described.

By April 2, a statement from the Chinese Ministry of Commerce announced the imposition of customs duties on 128 US products, of which a number of US products and commodities (including automobiles, planes, steel, soybeans, pork, and fruits) topped the list. The US Trade Representative took the decision to publish a list of more than 1,300 Chinese import products and imposed on them customs duties.

Could there be a US-Europe trade war?

Could there be a US-Europe trade war?

Just days before the final decision was made by both sides, Trump issued tough and clear threats to confront the European Union over what he called as a “totally unfair” trade policy toward the US. The European Commission responded to Trump’s remarks with Margaritis Schinas, spokesman for the European Commission, stressing that the EU is ready to react strongly and appropriately to the impact on its exports at a press conference in Brussels.

Shinas commented that the EU is committed to the multilateral economic system that has existed since the end of World War II and is supported by the World Trade Organization adding that trade should be a “win-win” and while trade must be open and fair, it must be based on the rules.

Trump: EU treats the US very “unfairly”

For his part, Trump, in a television interview on the ITV British channel commented on the unfair deal by the European Union towards his country noting that he has a great ability to take action highlighting the difficulty the United States faces in distributing its products in the European Union, with Brussels exporting its products without tax or reduced fees to Washington. In the same context, the US administration imposed in January last year protection fees on solar panels and washing machines imported from China.

For his part, Trump said in a tweet that he would impose taxes on imported European cars if the EU countries decided to raise tariffs against US companies and added that Europeans make it impossible to sell American cars in their markets while their cars enter the US market without customs duties which he considers to be unfair noting that this must be corrected, pointing out that the US has an annual trade deficit of 800 billion blaming the previous administrations of Bush and Obama.

At the end of May 2018, Trump made clear in his statements about the administration’s intention to impose additional duties on US imports of steel and aluminum materials from EU countries up to 25% of the total value of purchases in response to the fees imposed by the European Union on US companies. Australia, Argentina and Brazil which initially received a temporary waiver, agreed to set limits on the amount of minerals that could be exported to the US in exchange for permanent exemption from US tariffs.

Trade war between US and China

Trade war between US and China

At the beginning of July 2018, EU Trade Commissioner Cecilia Malmström expressed her concern about the imposition of countermeasures between the US and China after a new tariff went into effect and warned of the consequences of these decisions taken by both sides noting that the disturbing developments with regard to the escalation of tariffs between the United States and China could have a devastating effect on the global economy.

EU: We have a whole arsenal at our disposal

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, also spoke on a strong tone noting that once Trump implemented these measures, the European Union has a full arsenal at its disposal to respond to such measures which include the imposition of European fees on US exports of oranges and tobacco. He added that Congress must understand that this will be a loss for everyone as the EU is the largest trading partner of the US by a very large difference in value and has the second largest trade surplus with the US after China.

For its part, the European Commission, which is in charge of trade policies, describe what could happen to the US economy if Trump carried out his threat.

Global economic fallout beween US, China and Europe

Global economic fallout between US, China and Europe

In July 2018, while in talks with European Commission President Jean-Claude Juncker, Trump received a number of concessions from Brussels where the latter agreed to consider the issue of increasing the export of liquefied natural gas from the United States, reduce industrial tariffs and harmonize standards for the use of health products as well as increase the imports of soybeans.

The trade dispute between the US and Europe, as a result of the Trump’s brutal policies, has negatively impacted the economic growth rate in the European Union which led the bloc to search for trade and investment channels with other regions of the world after a year of negotiations aimed at reviewing the North American Free Trade Agreement (NAFTA) and has raised tensions between the member countries of the agreement recently. It was agreed that 75% of the components must be manufactured in the US, Mexico or Canada in order to qualify for the exemptions. Mexico is the third largest trading partner of the US after Canada and China with $531 billion in operations.

What is a trade war?

The trade war refers to the tendency of two or more countries to issue declarations and decisions to impose tariffs or establish trade barriers on each other to stop the commercial exports of the competing country and impose tariffs on many of its products exported to the other country. This is what happened between the US and China, two the world’s largest economies.

It is worth mentioning that the war between these two countries will negatively affect the European Union countries as well especially after the strict decisions taken by US President Trump against the European Union recently on the imposition of customs duties on goods coming from Europe have an adverse effect on the European economy and threatens to tip the global economy into recession.