Whilst the world delighted over the landmark US-North Korea summit in Singapore, which boosted hopes for long-elusive peace on the Korean Peninsula, the Trump administration quietly started a new battlefront. Interestingly, President Donald Trump has shown disdain over trade with EU. According to him, as a trading partner, the European Union is “possibly as bad as China, only smaller” (Fox News, July 2, 2018).
At this point, one needs to turn to some scenarios. First, the US has imposed tariffs of 25% on Steel and 10% on Aluminium imports from Canada, Mexico and the EU.
Second, in retaliation the EU slapped tarrifs on US motorbikes, orange juice and whiskey, which targets Republican states, bringing US closer to an all-out trade war. On Jun 22, the EU imposed $3.3 billion worth of tariffs on US goods, a latest strike in a looming trade war.
As these things stand, the EU seems to have been quite measured in terms of its response with these tariffs targeted specifically at the key states particularly of course in mid-term election near in November and they’re designed then to have political effect rather than economic.
So, the EU’s response has been strategic. It’s being political and it’s being strategic and it’s being designed to cause little damage domestically as possible. European leaders tried to change President Trump mind about tariffs during the recent G-7 Summit in Canada that meeting didn’t go down well at all with a new round of EU levies taking hold. Relations seem destined to become even more tense.
From the US point of view, what they’re preaching is mercantilism that supposedly died. But what they are telling Donald Trump is America is strong today, in 20 years America will not in the same position. So, the time is now to strike. So, they’re selling this not only the Zero-Sum ideology but they’re also saying that this is the only time that US can reassert itself and prolong its stay at the top. Now, this is all wound into American exceptionalism that the US must be politically, militarily and economically hegemony in the world in order to guide it towards this liberal capitalist democracy.
The irony of course is that it was past American Presidents who created the multilateral trading system and they saw it as an extension of American Power, an extension of American prosperity and normally when hegemon decline, they try to extend the period for which they are powerful. And it would be an American interests to try and preserve the system that it’s created in its own image and therefore prolong its power and instead of that Donald Trump has taken a completely different approach which is to say actually we’ve been cheated and I’m going to blow the system.
On that note, it’s a slightly bizarre situation where the World is watching intently that one global superpower is masquerading under a victim complex. The question naturally comes next is: who’s treating US unfairly? It’s the rule based system that the countries operate on was largely driven through at the behest of the US And it’s largely works.
EU and US imports tariffs in terms of on a trade weighted basis that are around 2% to 3%; they’re about the same. So, it’s just difficult to understand where this complex has arisen from.
But going back to one of the earlier points as well, does the US’ retreat from the World provide opportunities for other groups of nations to take the initiative?
Yes. Trump pulling out of the Trans-Pacific-Partnership allowed the EU to finalize its agreement with Japan. We’ve seen that EU opened up negotiations with Australia and New Zealand ; it’s just upgraded its agreement with Mexico. In all of these agreements is exporting its own regulatory frameworks, its own way of doing things.
But most importantly, are we witnessing then the unravelling of the established world order( a system that’s been in place for 70 years or so) largely put in place by the US and its Western allies. Is this now unravelling?
The answer is: that’s how it looks to many people and that’s what is causing such concern among many people who have watched the system. It seems to be unravelling so quickly. It took 70 years to build the system to where it exists today. It can all topple over very fast. We may be reaching a breaking point much sooner than people anticipate. For example, we’re counting on the World Trade Organization to help stabilize things but the US is also undermining the WTO’s ability to do that.
Also, worth noting that whether this system that the World has had in place for 70 years or so , whether it’s actually in need of a reboot? Perhaps it’s served its purpose, it’s now time to change it because as we now know there are many people who have not benefitted at all from this period of globalization from this 70 years of Bretton Woods and so perhaps it is time to be shaken up.
There’s some merit to that. One might want to knock over the whole to get better outcome especially for those who haven’t seen benefits over a period of largely peaceful global economic growth. If one doesn’t have economic benefits during 70 years of peaceful economic growth and how one’s going to get economic benefits from a period of economic nationalism that rarely works out in people’s favour. So, this is the challenge.
Stated simply, on the consequences of America first strategy is that America will find that there’re costs to be paid from putting America first. And, one of the cost is that other countries will seize the initiatives and start setting rules that are less favourable to the US, more favourable perhaps for the other countries in other regions.
On a different note, Can we even go to further then as to suggest that the powerful transatlantic alliance is over? No, of course, not. There’s more than just that bonds between the US and EU but it’s certainly under strain. It’s certainly not in a great shape at the moment. It would be quite bad for both parties if the trajectory was to continue on this on its downward path.
Frankly and fairly, it won’t be exaggeration to say that if this continues and isn’t resolved soon US is going to find itself into isolationism. It’s going to find that the World around it changes and perhaps not in the way it likes.
It will be a complex scenario, worth watching with caution. It will cast a long shadow on the rest of the world.
Md. Sharif Hasan is a field researcher for the Centre for Genocide Studies at the University of Dhaka