What effect will Trump’s trade war with China have on the European Union?

President Trump’s recent rhetoric suggests he is taking a similar approach to the one he used

with North Korea, hoping to bring enough pressure on China to force them to the bargaining

table at the G20 summit at the end of November. He’s said he expects a “great deal”. So far, the

tariffs have not had the full effect that Trump hoped for. Still, there is room for significant

movement on China’s part in the realm of domestic reforms, intellectual property protection, and

competitive neutrality. China will most likely offer concessions and will probably match US

tariffs dollar for dollar. Currently, tariffs on China are at 10 percent, and are scheduled to rise to

25 percent in January unless a deal is struck. 

China’s exports to Europe and Southeast Asia are growing fast. Any decrease in exports to the

US market could be partly offset by an increase in exports elsewhere. Foreign direct investment

in China is up by 6%, and America’s is down by 72%. So far Trump is failing to attract more

foreign investment in the U.S., so it’s possible an olive branch will be offered to EU countries in

early 2019. Europe has countered U.S. steel import duties with increased tariffs on Florida

orange juice, Harley Davidson motorcycles, and bourbon.

If we see a global trade war, with everyone raising tariffs unilaterally by say, 10 percentage

points –worldwide GDP growth would slow by around 2.5 per cent over 36 months. With a

global economy pegged at around $90 trillion, that’s a serious hit. We’ll have to wait until

November 30th to find out if President Trump is a true “Master of Trade”, or just a master


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