By Alex Callinicos
Downloading PDF. Please wait... Issue 2615

The global trade war hasn’t been resolved

This article is over 5 years, 4 months old
Issue 2615
Jean-Claude Juncker, Donald Trump and European Council president Donald Tusk in 2017
Jean-Claude Juncker, Donald Trump and European Council president Donald Tusk in 2017 (Pic: The White House/Public Domain)

Last week the developing trade war between the three main economic blocs—the United States, the European Union (EU), and China—seemed to relent. Jean-Claude Juncker, president of the European Commission, met Donald Trump in Washington. They agreed to put no new tariffs on imports while a working group discussed how to reduce the EU’s huge trade surplus with the US.

But the tariffs that Trump imposed on steel and aluminium imports into the US at the beginning of June and the retaliatory duties the EU placed on US goods remain in place. Moreover, as a businessman Trump may have put his name on a book called The Art of the Deal, but he was notorious in New York for reneging on deals.

In May the White House announced the trade war with China had been “put on hold” after he met the senior Chinese official Liu He. Trump pulled out of his agreement with Liu days later.

The problem with the latest deal is partly that trade frictions between the US and the EU have different dimensions.

The focus has been on Trump’s threat to impose a 20 percent tariff on car imports from Europe—which would hit Germany, the great manufacturing and export hub of the EU, particularly hard.

But the most difficult sector is agriculture, which is heavily protected on both sides of the Atlantic. A particular point of conflict is the EU’s refusal to allow genetically modified organisms into its food market.

Juncker promised that the EU would import more soya beans for the US. This is a big deal for Trump because China reacted to the tariffs he slapped on its imports by switching from the US to Brazil to supply its very substantial soya bean imports. US farmers were hit hard.

Trump is already out campaigning in the mid-term elections to the US Congress in November. “We just opened up Europe for you, farmers. You’re not going to be too angry with Trump,” he told a rally in Iowa last week. The other side of the coin, as the commentator Wolfgang Munchau pointed out, is that the deal may break down “when the EU realises that, by importing more US soy beans, it may be importing genetically modified organisms. It is possible that Juncker may have just agreed to that.”


Germany welcomed the deal, but the French economy minister Bruno Le Maire expressed reservations. He said agriculture should “be kept outside the scope of the discussions…We have high sanitary, food and environmental standards…Europe will not compromise on these norms.”

Trump said the US and EU working group would discuss issues such as intellectual property theft, industrial subsidies and the conduct of state-owned enterprise. This is a not very subtle way of referring to China’s giant state-directed economy. Maybe he and Juncker are hoping to create a common front against Beijing.

But these three huge economic blocs are bound together not just by trade but by investment. Chinese firms—many of them state controlled—have become increasingly active in buying up firms in America and Europe. If the Chinese state were merely a tool of Western-dominated “transnational capital”, as many people on the left still argue, this wouldn’t be a problem.

But in fact there is increasing concern in both the US and the EU that Chinese state capitalism is using foreign direct investment to buy up the technologies developed by their own firms. The situation is complicated by the fact that the Chinese market is now so important that major company mergers may need approval by Beijing’s regulators as well as those in Washington and Brussels.

Last week the US semiconductor company Qualcomm announced it was pulling out of a planned $44bn takeover of the Dutch company NXP. The reason was that the Chinese regulators reacted to Trump’s escalation of the trade war with their country in late May by stalling their approval. “We obviously got caught up in something that was above us,” the Qualcomm chief executive observed.

The incident showed both how interwoven the major capitalist economies are and how their interests still conflict. Expect the trade war to continue.

Sign up for our daily email update ‘Breakfast in Red’

Latest News

Make a donation to Socialist Worker

Help fund the resistance