The trade war between the US and the European Union (EU) is at risk of erupting, threatening widespread inflation on both sides of the Atlantic, especially as prices are gradually stabilizing after a long period of high prices.
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| The economic relationship between the US and the EU is one of the most important “ties” in the world. (Source: Centre for Europe Reform) |
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According to CSIS, the economic relationship between the US and the EU is one of the most important “connections” in the world, although it has often lacked depth and sometimes been strained. However, thanks to a heightened focus on economic security, the need for policy cooperation on China, and the conflict in Ukraine, the situation has changed under President Biden, promoting an unprecedented connection in US-EU relations.
The transatlantic economic relationship, the CSIS report notes, is vital to both Washington and Brussels, with bilateral trade and investment the largest in the world. The US is the EU’s largest trading partner, accounting for a fifth of EU exports in 2023, and is also the bloc’s largest investment destination, accounting for 55% of total investment.
Meanwhile, total US investment in the EU is four times larger than in Asia and the Pacific, while EU direct investment in the US is ten times larger than in India and China combined. The US has become an important energy supplier to the EU economy, especially in the field of liquefied natural gas (LNG) imports, accounting for 50% of Europe's supply since Russia launched its special military operation in Ukraine.
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| The US has become one of the largest LNG suppliers to Europe. (Source: Reuters) |
After being re-elected as President of the European Commission (EC), Ursula von der Leyen is preparing a new era for Brussels, with increasing global protectionism and the weaponization of economic interdependence.
The EC’s political guidelines for 2024-2029 state that economic security is the first pillar of its foreign economic policy agenda. Now, the main objective is no longer the expansion of free trade, marking a significant change from von der Leyen’s previous term, as well as from the EC’s traditional trade policy objectives.
The EC has beefed up its trade defence arsenal, including creating an anti-coercion tool that allows retaliation against countries that use “economic blackmail” against multiple EU members. With a comfortable re-election, von der Leyen could use her powers to counter any coercive trade measures from the US, especially under the Trump administration.
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| After being re-elected as President of the European Commission (EC), Ursula von der Leyen is preparing for a new era for Brussels. (Source: CEPA) |
In addition, a second term for Mr Trump could lead to a trade war between the US and the EU. The former US President affirmed that tariffs would be the centerpiece of his "America First" trade agenda.
In a recent post on social network X, Mr. Trump hinted at targeting Brussels' free trade policy if he returns to the White House.
“I know the European Union very well. They take advantage of the United States very much on trade,” Mr. Trump emphasized.
In addition, according to CSIS experts, Mr. Trump's proposal to impose a general 10% tariff on all imports into the US is a major risk to the EU economy. The tariffs that the former President applied in 2018 on European steel (25%) and aluminum (10%) may be re-imposed. Previously, these measures were suspended by the Biden administration until March 2025. Mr. Trump has repeatedly threatened to impose tariffs on imported cars from the EU, which is a politically sensitive industry for Germany.
Robert Lighthizer, a former top trade official in the Trump administration, is likely to take on a number of key roles in a second term and is expected to pursue a range of disruptive trade policies. Existing trade conflicts such as the Airbus-Boeing subsidy dispute, steel and aluminum tariffs, and European digital taxes could be used to pressure Brussels into making concessions.
"Threatening both banks"
CSIS stressed that the US election has a significant impact on the EU. The union will respond to Mr. Trump's tariffs with its own tariffs, a move similar to what the EU did during the former president's first term when it imposed tariffs on Harley Davidson and American whiskey.
A trade war between the US and the EU could escalate and would inevitably lead to inflation on both sides of the Atlantic, especially at a time when prices are stabilizing after a long period of high prices. Therefore, the EU’s ability to inflict significant “damage” on the US economy would help the alliance prevent Mr. Trump from escalating the trade war.
Brussels will certainly not be caught off guard. The Commission has set up a task force to prepare for policy changes after the US election, in particular to deal with heavy tariffs and the possibility of Washington withdrawing from NATO.
In autumn 2024, the Commission will step up its dialogue with EU governments, sharing insights on potential EU vulnerabilities and how to mitigate risks. One of the Commission’s priorities is to develop a communications plan to respond to major changes in US policy towards Europe, such as the demand that EU states shoulder more responsibility for defence funding for Ukraine.
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| European companies could benefit if Mr. Trump eliminates subsidies in the IRA, which favor American manufacturers over European businesses. (Source: Bloomberg) |
Climate is also a point of contention between the two sides. Mr. Trump has shown hostility toward the Paris Agreement and the Inflation Reduction Act (IRA), which could lead to a wave of resentment and anti-Americanism in Europe, especially among young people who are at the forefront of climate action. However, European companies could benefit if Mr. Trump eliminates the subsidies in the IRA, which favor American manufacturers over European businesses.
While the EU has been trying to build a unified stance with the US, a second term under former President Trump could use his influence to influence some EU countries, preventing a strong response from the bloc, according to CSIS. Hostility in US-EU relations would “block the way” of efforts to build a common transatlantic economic position towards China.
In contrast, the Kamala Harris administration is expected to further strengthen the US-EU relationship and avoid trade conflicts. Harris, like Biden, does not want past trade issues to affect the relationship. Therefore, problems such as the Boeing-Airbus dispute and tariffs on steel and aluminum will continue to be postponed or seriously attempted to be resolved.
The EU-US Trade and Technology Council (TTC) is likely to continue to operate, facilitating engagement of key officials, providing greater room for cooperation on renewable energy technology, critical supply chains, and technology regulation for both sides. The Harris administration will increase cooperation with the EU on issues related to China and economic security.
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| Regardless of who wins the White House race, by January 2025 the next administration will need to strengthen the important relationship in the economic order between the US and the EU (Source: Getty). |
CSIS asserts that regardless of who wins the White House race, the next administration will need to strengthen this important relationship in the global economic order by January 2025. A trade war between the US and the EU would only harm both sides, benefiting China. Instead, the US-EU relationship should continue to strengthen on the progressive foundation of the TTC, while increasing cooperation on economic security, the green economy, Ukraine’s reconstruction, and China’s sanctions, subsidies, and discriminatory trade policies.
In short, the US-EU economic relationship plays an important role in maintaining the global economic order. Regardless of the outcome of the US election, both sides need to strengthen cooperation to avoid a mutually damaging trade war, while continuing to address global challenges such as economic security, the reconstruction of Ukraine, and competition with the world’s second largest economy. A stable transatlantic relationship will benefit both sides and contribute to promoting sustainable global economic growth.
Source: https://baoquocte.vn/my-eu-moi-quan-he-lo-lung-trong-su-can-bang-290885.html
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