Analysis Of A Trade Conflict Between The US And EU

With the contrasting responses and situations, there are different strategies that both could potentially follow to make their situations better. When following the responses of the EU to the imposed tariffs, a statement can be made that they have approached the tariffs in a very liberal way. The EU has made it clear that not only do they want to escape the situation but also that they are very willing to negotiate with the US to potentially lower or remove their tariffs. This can be seen even in the case of Brussels considering negotiating talks on a tariff cutting deal to prevent a trade war with the US.

Furthermore, it has already been reported that the EU has set possible responses and plans that they could take. Possible responses include diplomatic negotiations as the EU trade commissioner makes it clear that they are open to talks. However they also have retaliatory measures as they are the world’s largest trading bloc and largest market for the US market hence having significant leverage should they negotiate. Though many other EU leaders are backing the rhetoric that the commissioner has placed, the initial part of their three part plan process to respond to the tariffs includes them needing to engage the EU in consultations with US counterparts. This is so that they can find a common standing to start a diplomatic solution much like Trump’s sentiment on a shared commitment on global excess in steel production. Their planed ‘three pronged’ strategy of diplomatic consultations potentially shows openings for coordination between the two parties which gives the question whether they should continue with this liberal strategy? This can be completely be contrasted from a realist approach where the EU responds back with less negotiations.

As previously mentioned, the EU does have more significant leverage in potential negotiations and they are prepared for retaliatory measures. Though EU leaders do back the commissioner’s rhetoric towards negotiations, the rhetoric also pushes the idea that the EU will not negotiate under threats and that though they regret to be in this situation, they will safeguard EU interests. So therefore, is the liberal approach better or would it be better to try to tackle the US head on with a more realist approach in self-interest? This contrasts the potential strategies of China as a statement can be made that they are more realist in their approaches than that of liberal. Negotiations between the US and China have been falling short as China’s economic policy maker, Liu He, meets Washington to negotiate yet fails to find anyone willing to agree or to make decisions. Either way both sides from both the US and China suggest it’s the others move even after the constant failures of their meetings. This then this poses the question of whether they should continue to try to negotiate or should they completely try to face US in a potential trade war?

In conclusion, the solutions and strategies I propose is different for between both the EU and China. In the case of EU, I believe that they should keep following negotiations to find a way around the tariffs. There is enough support from inside the EU to warrant more effort to trying to reduce their tariffs. A trade conflict between the US and EU would do considerable damage to both as well as challenge the rules based global regime. However, should they fail in negotiations then, as mentioned earlier, they have countermeasures ready. When it comes to China, I do believe that they should go ahead and continue with retaliatory tariffs as I believe it will damage the US more than it will China. In the case of the US, they have six factories in the state of Wisconsin with around 3,500 U. S. employees, who could face up to $5 million in additional costs each year due to the tariffs, worth potentially 3% of its $160 million profit in 2017. If the company doesn't charge its customers more then, they would consider reconfiguring the supply chain or moving factories to cheaper locations abroad. So even if the US continues their tariffs despite their growing deficit then China can easily retaliate with Beijing officials having targets among the $130 billion in annual US exports with the example of US farmers sell $12. 4 billion in soybeans to China that Brazil could replace. Overall, the US is looking to cause more harm to themselves should they continue to impose tariffs and it is a point that China can definitely exploit to their favour.