For Now, the White House Sees Trade with the EU as Win-Win
The transatlantic trade truce announced by President Trump and EU Commission President Juncker after their meeting in the White House yesterday is significant for two reasons.
First, the U.S. president gave his seal of approval to the idea of “strong trade relations in which both of us will win” in the joint U.S.-EU statement issued by the two leaders. For Trump, who only a day before his get-together with Juncker bemoaned the fact that the United States “lost $817 Billion on Trade last year” (referring to the U.S. trade deficit in goods), this was a considerable change of course.
Some caution is still in order. Rhetorical support for positive-sum trading relations is important, but the fact that one outcome of the meeting was increased EU purchases of U.S. soybeans and natural gas suggests the administration has not given up its ambition to reduce the U.S. trade deficit with the EU. Much will depend on how the “Executive Working Group” set up yesterday to move forward a common trade agenda will measure progress. If bringing down the U.S. trade deficit with the EU—something trade-policy tools cannot be expected to do—is part of that calculation, the U.S. is destined for disappointment. In which case the president could well decide to pull out of the talks and impose new tariffs, for example on automobiles.
More optimism may be in order when it comes to the second important aspect of the Trump-Juncker meeting: cooperation on China. While some of the president’s aides have spoken positively about the value of working with the EU to confront the challenge from China, yesterday’s gathering marked the first time the president himself endorsed this idea. When Trump and Juncker agreed in their declaration to “work closely together with like-minded partners to reform the WTO and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity,” they clearly had China in mind.
This commitment to working with the EU on unfair trading practices does not mean the U.S. is going to give up trying to use tariffs to force changes by Beijing. Still, Trump’s support for a second track of economic diplomacy with the EU and within the WTO to counter China’s state-capitalist model marks a change. Perhaps the administration is now united around the notion that the U.S. cannot advance its key global economic interests alone and needs cooperation with like-minded trading partners. And that instead of engineering a de facto withdrawal from the WTO, the White House sees the opportunities for the U.S. in working with the grain of the institutions of the liberal economic order.
The friendly atmospherics of yesterday’s White House meeting notwithstanding, the U.S. and the EU are far from the intense cooperation that characterized the Transatlantic Trade and Investment Partnership (TTIP) negotiations under the Obama administration or even the more modest engagement of the Transatlantic Economic Council launched during the previous Bush administration.
As long as the U.S. maintains its tariffs on EU steel and aluminum (purportedly for national security reasons) and the EU keeps its retaliatory tariffs in place, a skirmish or two across the Atlantic cannot be ruled out. But a trade war has been avoided.