Three steps to avoid a trade war


Looking at the news over the past days, it is easy to think Europe and the United States - allies - are preparing for battle. Yet the strong language and war rhetoric currently dominating headlines on both sides of the Atlantic paint a bleak picture. In what seems to be a zero-sum game, the European Union and the US risk getting caught up in a trade war. Not against China, but against each other. It is essential that Europe keeps its cool and takes every measure to avoid this from materialising.  

The uniform tariffs on steel (25%) and aluminium (10%) imports announced by president Trump last week did not come out of the blue. Trump had already used his ‘America First’ campaign to vow he would take protectionist measures to protect American jobs and the American economy. This aggressive campaign rhetoric however turned out to be a mere warning shot when compared to the escalation we saw last week and the trade war now hanging over our heads. Not only did Trump announce tariffs against all countries, including allies, he also took it one step further and directly threatened the import of European cars. On Twitter. China in the meantime stays out of the spotlight, while that country is the real culprit when it comes to the dumping of steel and other products on international markets.  

Commission President Jean-Claude Junker also got carried away by the strong language used, reassuring the European public that: ‘we can do stupid too’. Make no mistake, decisive action from the EU is essential, but impulsive and confrontational language needs to be avoided. We would do better to take a note from Michelle Obama’s book: “When they go low, we go high”.  

In the meantime, commissioner for international trade Cecilia Malmstrom should continue setting high global standards through international trade agreements. Such as the recent agreements with Japan and Canada. And the European trade agenda goes far beyond the opening of markets. Many European policies aim to curtail rather than promote trade, in order to protect human rights in third countries. This has already resulted in the curtailing of the trade in conflict minerals, torture goods and dual use technologies. We should not allow ourselves to stoop to Trump’s level. Instead we need to hold on to our liberal values and principles and to continue to stress the value of cooperation, always and everywhere.  

In the US, the race for setting tariffs is far from over. Trump has only decided that he will take a decision and a growing number of Republicans has spoken out against targeting (NATO) allies, including the EU. In the meantime, the European Commission today discussed a list of American goods that will face European tariffs the moment Trump makes a formal decision.  

Instead of focussing solely on these countermeasures however, we should:

  • Work with the United states to address China’s unfair trade policies - which are the cause of today’s unbalance trade flows and an overproduction of steel and aluminium;
  • Actively explore and make use of all legal avenues within the World Trade Organisation;
  • Stay in close contact with American businesses and the Republicans in Congress. To ensure that Trump’s tariffs don’t make it past the negotiating table and that Europe will never have to use the measures discussed today.

Imposing tariffs against strategic American products can only be a measure of last resort. We have to prevent the western world from becoming engulfed in a tide of protectionism. This would lead to the erosion of the very international trading system that Europe has helped construct. At a time in which China is on rise with a political economy that goes directly against ours, the EU and US need to stick together. Instead of going against each other.