Europe is bracing itself for a trade war

After Trump’s announcement of punitive tariffs State-mandated silence in China

At the core, however, it’s about much more than just economic retribution. The EU wants to counter Trump’s nationalist policies and position itself as an advocate of open markets. Trade Commissioner Malmström is certain, “The US measures will have a negative impact on transatlantic relations.” The EU will seek a dispute settlement procedure with the WTO as soon as possible. The cause of the problems in the steel and aluminum sectors are “global overcapacities caused by non-market based production”.

That’s what China means. Malmström wants to resolve the dispute in the conversation: “This sole action of the United States will not help.” The EU definitely wants to avoid being caught between the fronts. Because if Chinese steel loses its sales market in the US, more of it will be sold to Europe. Trump’s calculation: The Europeans would then also raise duties. The EU does not want that, but it could come about to protect the European steel industry with more than 300,000 jobs.

Beijing will host the National People’s Congress on Monday, the most important political event of the year. And that should not be disturbed by any means. Eventually, the more than 3,000 delegates will confirm the almighty state and party leader Xi Jinping for another term as President of the People’s Republic, and Prime Minister Li Keqiang will continue for five years. Add to this a well-known constitutional amendment that will cement the power of Xi Jinping. At the request of the Communist Party, the People’s Congress is to decide that the President will not have to leave the country after ten years as before. China is well occupied with itself. People’s Congress on all channels. A crisis, a dispute with the United States? Wrong time. Trump’s punitive tariffs are not an issue, but silence.

The Consultative Conference will be held in Beijing in parallel with the People’s Congress – an advisory body peppered with a number of entrepreneurs, many of whom are billionaires. There will be the first press conference on Friday. Actually, the perfect stage to ask: What do the punitive tariffs mean for the Chinese economy? Are China’s companies adequately prepared? How will the state-owned companies respond that have built up huge overcapacity in steel but also for cement, aluminum or paper? Are retaliation planned? Is there a threat of a trade war between the two largest economies in the world? No answers, because nobody asks these questions. Everything is agreed, every word announcement before set. Not a single journalist from abroad is approached.

State tenders often involve Chinese manufacturers

State-mandated silence in China. Still. The propaganda can be very different too. When Trump threatened punitive tariffs last summer, there was great indignation. In the event of sanctions, Beijing threatened with retaliation. “If the US does not respect the facts and rules of multilateral trade and take measures that harm economic and trade relations, China will not stand idly by, but take appropriate measures to protect China’s legitimate rights and interests,” it said in a statement by the Ministry of Commerce.

It is above all the People’s Republic itself that systematically isolates itself like hardly any other economy. In many industries, foreign companies are only allowed to produce in China if they partner with a local partner, the profits must be shared. State tenders often involve Chinese manufacturers. According to a survey by the OECD Developed Countries (OECD), China is currently 59th out of 62 in terms of openness to foreign direct investment. That means the market is tight. And it could be much more difficult.

What a Chinese reaction might look like, the Global Times had already sketched shortly after Trump’s election victory: “A batch of Boeing orders would be replaced by Airbus, American cars and iPhones would have a hard time in China, and imports of soybeans and corn would be stopped. ” Chinese students in the US? Not allowed anymore. The state and above all the Communist Party have almost unlimited penetration in the People’s Republic. However, China’s bargaining position is not nearly as good as the government’s. In particular, punitive tariffs would hit China’s export industry, which has shipped about 20 percent of its goods to the United States. Mass layoffs and reduced economic growth could be the result – a horror vision for President Xi and his colleagues.

In Europe there is little hope that Trump will give in. Nonetheless, there are likely to be many phone calls over the weekend between Paris, Berlin and Washington. The chances of success are low. Trump writes on Twitter: “If a country (USA) loses billions of dollars in trade with almost every country it does business with, trade wars are good and easy to win.”