Is there an upside for China in the US-EU tariff row?
- The United States is planning new duties on European products in a 16-year dispute over aircraft subsidies
- It could create more common ground between Beijing and Brussels but there are drawbacks, observers say
“Anything that distracts the attention of the US or EU from the trade issues they have with China and undermines their ability to work together cooperatively would accrue to China’s benefit,” said Stephen Olson, a former trade negotiator with the Office of the United States Trade Representative (USTR) and now a research fellow at the Hong Kong-based Hinrich Foundation.
On Tuesday, the USTR announced that it was considering putting tariffs on US$3.1 billion of European imports, including aircraft, cheese, ham, beer and gin, from France, Germany, Spain, and Britain.
The US tariffs are likely to be imposed after July 26, when the public comment period ends, according to the USTR.
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The EU criticised the US plan, saying it “creates uncertainty for companies and inflicts unnecessary economic damage on both sides of the Atlantic”.
In a landmark ruling last year, the WTO upheld the US claim and gave the Trump administration approval to impose tariffs on up to US$7.5 billion of European goods. The WTO also ruled that the EU had not ended the illegal subsidies, which had left the US with further room to impose new duties on European goods. The WTO is expected to rule next month on what duties the EU can impose on the US for its subsidies for Boeing.
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Victor Gao, a former interpreter for late Chinese leader Deng Xiaoping and vice-president of the Centre for China and Globalisation, a Beijing-based think tank, said the US-EU trade tensions would give China and European countries more incentives to seek more common ground “in their common effort to fight against such aggression from the only remaining superpower”.
“It’s not worthwhile to become a prey of such predatory trading policies of the United States,” Gao said.
“More and more European countries are coming to the full realisation of the true aggressive nature of this US government.”
But Deborah Elms, executive director at Singapore-based Asian Trade Centre, said the dispute might not be all good news for China, given that it pointed to a breakdown in the global system.
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“I’m sure China leaders woke up happy about this, because the more that you have the US attacking different parties, the harder it is to make a good coalition against anyone or in favour of anything,” Elms said.
“But I think for China it comes with a particular challenge, which is you rely on the trading system, and the trading system is not functioning. That’s a problem.”
Elms said the proposed US tariffs also showed that the Trump administration continued to believe strongly in the power of such duties.
“It shows that the Trump [tariff] policy is not just a China policy ... I think that this fight between the US and the Europeans will continue at least through the rest of the Trump team,” she said.
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She added that China could gain from becoming an alternative supplier of some goods but there also products that could only come from Europe.
Analysts said they did not expect ties between the US and Europe to worsen, given that the two parties could be at odds on one issue but also team up to fight a different party if necessary.
“A major tariff escalation between the US and EU would certainly complicate their ability to work together, but it is sometimes possible to compartmentalise trade issues and fight in one area while cooperating in another,” Olson said.
“The more politicised a trade dispute gets however, the more difficult it is to compartmentalise.”
