Donald Trump comes first among hooligans on the global stage. Not that he’s interested in tearing up your local bar, at least for now. Instead, the US president is determined to crack the global system by throwing stones in the form of tweets and executive orders.
He is a bully who likes to flex his muscles, i.e. America’s defence spending and market size, to make other nations yield to his demands. The question for the other kids on the playground is how to deal with him.
It’s an even more urgent challenge for Europe, once a long-time friend and still diligent pupil of the system.
It seems the EU is losing its temper finally. Trump’s intended withdrawal from the Paris Agreement, his criticism of Europe’s military spending and his warnings about trade deficits made the Europeans clench their fists.
When the US pushed the Union against the wall by imposing tariffs on steel and aluminium imports, the Europeans said ‘enough is enough’.
As the school rulebook says, either you stand up to the bully or you’ll be in the tormenter’s crosshairs forever.
“The EU cannot accept being bullied,” one EU official told this reporter.
We already started to run out of patience a while ago. “Our mood is increasingly combative,” said European Commission chief Jean-Claude last year in Hamburg when the White House threatened tariffs for the first time.
The US finally pulled the trigger last week. While other nations, including Mexico, Canada and Australia, may escape the tariffs, Europe, the long-time security partner, could suffer the restrictions unless fresh concessions are offered to Trump.
“It is unacceptable” to pay to avoid unfair duties against NATO allies, European officials claimed.
Trump flourishes in Europe’s fury. While a meeting with his trade envoy failed to bring any success on Saturday, the US president fired a shot against his favourite target: German cars.
For the Commission, Trump is manipulating trade relations by “cherry-picking” some high tariffs on the EU side, while the broad picture is more balanced.
So if the US starts increasing tariffs to level the numbers, the EU could follow suit.
“If anyone starts throwing stones, it is better to make sure he’s not living in a glass house,” a Commission spokesperson said on Monday.
The bloc knows it is not enough to just make some noise; a few punches will have to be thrown against the bully. The Commission prepared a list of retaliatory measures to punish US exports, including symbolic brands like Harley Davidson and Levi’s.
But even if European steel and aluminium is punished, experts believe that the Commission would not activate its own list of countermeasures.
“That is exactly what Trump wants,” Bruegel’s Andre Sapir told this reporter. “We will have to bring down the temperature,” he added.
There isn’t just the chance of getting some bruises while trying to fight Europe’s corner but ultimately to increase the risk of a global downturn that some investors and analysts expect by the end of this decade.
Financial markets “could get worried” if a trade war starts, and the spiral could lead to a negative climate that would scare investors and consumers and shrink the real economy, Sapir explained.
Countries more exposed to the US market called for prudence before reacting. “We shouldn’t go down this road”, Dutch Finance Minister Wopke Hoekstra warned on his way into the Eurogroup meeting.
He was not alone. Spanish counterpart Román Escolano wants the EU to avoid an “escalation” in protectionism.
When the stakes are high the price you pay if you chicken out may be too high.
“We have to choose if we want rule-based trade in a rule-based world” or we want to live on a planet based on the “rule of the strong”, Jyrki Katainen warned last week.
Are we willing to pay the price?
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