Now that President Donald Trump has reached a provisional trade agreement with China, trade tensions threaten to rise between the United States and Europe. That is what credit insurer Euler Hermes Nederland predicts.
“Do not think that the trade war is over now that China and the US have concluded a phase 1 deal,” writes the credit insurer Tuesday. “After China, it’s now Europe’s turn” for a trade confrontation with the Trump government, the company says.
Risk specialist Johan Geeroms of Euler Hermes states that Trump wants to show his supporters that he is not only tackling China. According to him, “all signals are red when it comes to an American-European trade war.”
One of those signals is that the increasing trade deficit of the US with Europe is moving towards 200 billion dollars (180 billion euros). According to Geeroms, that is unacceptable for Trump, who sees trade relations in terms of winners and losers.
“He cannot help but tackle this imbalance with tariff increases,” says Geeroms. He points out recent statements by the American trade representative Robert Lighthizer, who said that the unbalanced trade relationship with Europe is not sustainable. With such statements, the White House alludes to a trade war according to its analysis.
“Trump has often complained about the large American trade deficit with Europe,” said Geeroms. “The huge surplus on the German current account is a thorn in his eyes.” The president wants Europeans to import more American cars and agricultural products, he says.
Trump has a particular focus on the German car industry. So far, his government has waived higher import tariffs on cars from Europe, despite Trump’s threats to raise those tariffs to 25 percent. There would be disagreement at the top of his government about such charges.
According to Geeroms, Europe is a grateful target for Trump in the current election year. “Trump paints the image that Europe subsidizes everything and that the US is the victim,” he says. The president can tell voters that it is high time for Europe to open up its market. “That kind of claim goes in like a cake.”
In addition, according to Geeroms, there are other annoyances in relations between the US and Europe, including the dispute over subsidies to aircraft manufacturer Airbus. The US has received approval from the World Trade Organization (WTO) to impose $ 7.5 billion in criminal charges on European goods, in retaliation for illegal European subsidies. This is the largest penalty levy ever approved by the WTO.
The US and Europe have been negotiating for almost two years about improving trade relations. Trump and the former President of the European Commission Jean-Claude Juncker have agreed on a work program to stimulate mutual trade, but there is not much progress. Now that Juncker has been succeeded by Ursula von der Leyen, according to Geeroms “a good time has come for a new showdown”.
According to Geeroms, Trump and Von der Leyen are not natural partners, partly because Von der Leyen favors a strong policy to combat climate change. Trump must “not like it at all,” he says.