A trade war with Europe would be larger and more damaging than Washington’s spat with China

23-Aug-2019 Intellasia | CNBC | 6:02 AM Print This Post

Data from the Office of the US Trade Representative shows that in 2018, the US imported $683.9 billion of EU goods and $557.9 billion from China.

However, looking at US exports, these reached $574.5 billion to Europe and only $179.2 billion to China. These figures included both goods and services.

The United States has more to lose from a full-blown trade war with the EU than it does with its current conflict with China, experts have told CNBC.

President Donald Trump has kept up his tough rhetoric against the European Union despite focusing on Chinese tariffs in recent months. But his administration is due to decide in November whether to impose duties on one of most important industries in Europe: autos.

There have already been tariffs on European steel and aluminum which led the bloc to impose duties of 25 percent on $2.8 billion of US products in June 2018, and, there’s an ongoing dispute regarding Airbus and Boeing but experts believe a wider spat with Europe would be much more damaging than the current tit-for-tat with China. Leaders of the G-7, the world’s seven largest economies, are due to talk global trade at a meeting in France later this week.

“EU-US trade matters most. It is by far the biggest single bilateral trade flow in the world,” Florian Hense, an economist at Berenberg, told CNBC via email.

“Counting exports and imports of goods and services, US-EU bilateral trade exceeded that between the US and China in 2018 by more than 70 percent,” he added.

Data from the Office of the US Trade Representative shows that in 2018, the US imported $683.9 billion of EU goods and $557.9 billion from China. However, looking at US exports, these reached $574.5 billion to Europe and only $179.2 billion to China. These figures included both goods and services.

“In 2018, the US exported more than three times more to the EU than to China,” Hense said, adding that the region could therefore hit back hard against Washington.

For its part, the EU’s trade chief Cecilia Malmstrom has said they would rather not be in this position of introducing levies, but would do so if the US struck first.

“The rules of international trade, which we have developed over the years hand-in-hand with our American partners, cannot be violated without a reaction from our side,” she said in June 2018. Since then, every time the US has threatened to impose further levies, Brussels has worked up different lists of goods to show how it could hit back at the White House.

US-EU economies are already struggling

Furthermore, both the US and Europe cannot afford a trade war at this stage. “While the US-China trade war is now starting to have effects on the broader health of the economy, it has taken a while and some of the effects were balanced by a benign economic climate,” Fredrik Erixon, director of the think tank ECIPE, told CNBC.

“That is not the case if there is a serious increase in tariffs between the US and the EU in the autumn. Both economies are slowing down, and the cyclical effect of the tariffs is likely to be pretty strong,” he added.

https://www.cnbc.com/2019/08/22/why-a-us-trade-war-with-europe-would-be-more-damaging-than-china.html

 


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