Trade war – Europe must rely on free trade

Trade dispute Those who want wealth need free trade

The US imposed billions in punitive tariffs on Chinese goods on Friday. China imposed retaliatory duties of similar proportions shortly thereafter. Thus the trade war reaches a new dimension. Previously, the climate has already deteriorated between Europe and the US, the US punitive tariffs on steel and aluminum will be repaid by the EU with new tariffs. From the European side, US President Donald Trump is identified as vicious and guilty of such a war. Instead of reacting to punishments with retaliation, it would be better to look for a solution for the benefit of all. This solution is obvious: free trade is the best for EU and US citizens in the long term.

If “America First” aims to improve the lives of Americans and ensure that they can afford even more consumer goods, US President Trump should bet on free trade. Protectionism will not make the US top-notch again. In fact, the first negative effects of US punitive tariffs on the steel and aluminum processing industry in the US, whose costs have risen due to customs duties, are already apparent. In the end, these costs will be felt by US citizens because their consumption options are becoming less diverse and more expensive. The average, non-weighted EU tariffs are slightly higher than those of the US. Tariffs lead to lower trade flows, which makes a fair weighting scientifically difficult and already fills specialized books.

Trade conflict between Trump and China escalates

The US imposes the threatened punitive tariffs on Chinese goods valued at $ 34 billion. China reacts with counter-tariffs – and speaks of the “biggest trade war in economic history”. By Jan Schmidbauer more.

Both the US and the EU are pursuing a mutually costly protectionism. Tariffs, technical trade barriers and even subsidy measures for companies, for example to the US aircraft manufacturer Boeing and its European competitor Airbus, have been and are used by both sides. In this sense, the often described as narcissistic US President is only a mirror for the decision-makers in the EU, in which they prefer not to recognize.

Of course, tariffs and other trade barriers in the EU have not arisen because of malice against the US. Rather, they are the result of the particular interests of certain political actors in EU countries. Thus, current EU tariffs are by no means a welfare optimum for EU citizens. Rather, the current barriers to trade on the part of the EU are a political-economic balance of organized stakeholders in Brussels. They represent the degree of limited openness that the EU has granted to others through multilateral agreements. In other words, more openness was not possible in multilateral negotiations so far. A genuine policy of the “Europe First” would try to take less account of the existing particular interests for the benefit of the people and therefore rely on free trade with the USA and with other partners. Free trade means competition, lower prices, more variety and often better quality.

One could also muster understanding for Trump

Unfortunately, bilateral trade negotiations have also been less successful in the recent past. They have not led to a reduction of trade barriers between the EU and the US. Given the higher tariffs of the EU, one may take a new view and understand the action of the US President as a reaction, punishment and lesson for Brussels: the EU should dismantle its trade barriers with the US. If you look at Twitter, the preferred communication channel of the US president, then he gets upset about comparatively high barriers to trade, sometimes pleads for free trade, calls for the abolition of barriers and a stop subsidies. He seems to know and to reproduce the basic knowledge of a broad economic literature. The US ambassador to Germany, Richard Grenell, expressed similar opinion, saying that he had at least made a complete renunciation of car tolls in the automotive sector, even if Europe did not want to do so.

The new US tariffs are formally juristically justified with the argument that national security would be endangered. That’s ridiculous, of course. The truth is that the customs policy of the EU, which is not explicitly malicious but harmful to the US, should probably be punished. The term used “punitive tariffs” is a proof of this. In that sense, one might consider the US punitive action as a “Like me, I see you” strategy. Historically higher EU tariffs will be compensated – at a later date – with US tariffs. That is unattractive and unfair because the US has so far accepted the EU trade barriers. Above all, Trump blames his predecessors for not achieving good negotiating results. Now he wants to change that and introduces punitive tariffs to persuade the EU to make new deals. Some understanding of this late punitive action could be found, especially because of the past failure of bilateral negotiations for further mutual trade opening.