Is Trump winning the trade war?
Economists like to argue that everyone is a loser in a trade war, but U.S. President Donald Trump is chalking up some early victories.
Deploying the same bullying tactics he used to squeeze rivals in the real estate business, Trump has used the threat of steel and aluminum tariffs to exact a string of big concessions.
After letting allies beg for two weeks to be spared from the new duties, the president announced last week that he would grant temporary reprieves to those countries that would agree, by May 1, to help America combat its yawning trade deficit.
While French President Emmanuel Macron insists that the EU will not be forced into helping out America at gunpoint, many countries seem to be lining up to give Trump what he wants. In sectors ranging from steel to cars, countries and big business groups from Germany to South Korea are flinching in the face of Trump’s hardball onslaught.
“It doesn’t matter to Trump whether this will hit back at the U.S. economy in the longer term,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy (ECIPE). “It’s a political initiative, not an economic measure. Just by keeping the initiative, you are forcing the others to engage.”
Trump will not, however, be satisfied with just slashing back U.S. deficits in Asia. His eyes are also focused on the EU’s €115 billion trade surplus with the U.S.
Despite protestations that the EU won’t be strong-armed into doing Trump’s bidding, Brussels has given indications that it is ready to work with his game plan, particularly in cracking down on China’s overproduction of highly subsidized steel. After years of treading ultra cautiously with Beijing, Brussels suggested this week that it would consider stronger action in line with the Trump administration’s wish list.
On Monday, Brussels launched a safeguard investigation into how it could combat surges of steel imports. Ostensibly, this measure is supposed to help protect the EU from inflows of Japanese, Chinese, Turkish and Russian steel that would be diverted away from the U.S. because of Trump’s tariffs.