The European Union’s recent announcement that it is preparing to retaliate if the Trump administration imposes tariffs on EU-made autos leaves no doubt that EU-U.S. cooperation on global trade will be compromised for some time if the tariffs go into effect. Besides whatever damage the conflict could do to U.S. jobs, industry, and consumers, this conflict will jeopardize essential allied collaboration to confront Chinese state capitalism, the underlying cause of much of the current trade conflict. When EU President Jean-Claude Juncker visits Washington on July 25, the administration should use the visit to find ways to step back from this precipice.
If the U.S. Gets into a Trade War with the EU, It Will Lose an Ally in Pressuring China
The case against auto tariffs.
July 24, 2018
Monty Rakusen/Getty Images
Summary.
The European Union’s recent announcement that it is preparing to retaliate if the Trump administration imposes tariffs on EU-made autos leaves no doubt that EU-U.S. cooperation on global trade will be compromised for some time if the tariffs go into effect. Besides whatever damage the conflict could do to U.S. jobs, industry, and consumers, this conflict will jeopardize essential allied collaboration to confront Chinese state capitalism, the underlying cause of much of the current trade conflict. The primary tool of China’s industrial policy is subsidies to state-owned enterprises (SOEs) for key industries such as robotics, advanced computers, and electric vehicles. The Trans Pacific Partnership (TPP) free-trade agreement, which the United States abandoned in January 2017, contained strong restrictions on SOE subsidies. Despite current trade conflicts, the European Union, Japan, and the United States have been quietly working to develop another agreement containing rules to restrain Chinese subsidies. Since the payoff for such joint action would be large, forging such an agreement must be a U.S. priority. The threatened auto tariffs and promised retaliation will make it harder for these efforts to succeed.