On 14 March, commenting on the state of the US-EU trade negotiations, Trump said "they are willing to talk to us and if they don't talk to us, we're going to do something that's going to be pretty severe economically. We're going to tariff a lot of their products."
It is easy to understand why the Trump administration is considering starting a full-fledged trade war with Europe. The president's twitter account offers a glimpse into his motives. On March 17 Trump tweeted:
General Motors and the UAW are going to start “talks” in September/October. Why wait, start them now! I want jobs to stay in the U.S.A. and want Lordstown (Ohio), in one of the best economies in our history, opened or sold to a company who will open it up fast! Car companies…..— Donald J. Trump (@realDonaldTrump) 18 марта 2019 г.
….are all coming back to the U.S. So is everyone else. We now have the best Economy in the World, the envy of all. Get that big, beautiful plant in Ohio open now. Close a plant in China or Mexico, where you invested so heavily pre-Trump, but not in the U.S.A. Bring jobs home!— Donald J. Trump (@realDonaldTrump) March 18, 2019
The intent is clear: Trump wants to "make America an industrial powerhouse again", providing meaningful job opportunities for the members of his electoral base. However, the President is wrong on couple of counts and he seems to chose wrong solutions for the right problems. The US economy is not "booming": according to the latest forecast published by the Federal Reserve Bank of Atlanta, "real GDP growth (seasonally adjusted annual rate) in the first quarter of 2019 is 0.4 percent."
Car sales are falling, not only in America, but across the world, including China. According to Edmunds.com, "February sales plummeted 2.8% to 1.26 million units. The seasonally adjusted annualised sales rate has come down to 16.6 million, the lowest in 18 months."
Of course, if Trump hits European automakers with punitive tariffs, the sales of US-made cars may increase, but the macroeconomic environment will not change. Making European cars prohibitively expensive in the US will definitely help General Motors and Ford, but at the same time such a move by Trump will make European politicians absolutely livid. Bloomberg reports on a study by IFO Center for International Economics, a well known German think-tank: "If the U.S. imposed permanent tariffs of 25 percent, German car exports to the US could fall by almost 50 percent, or about 17 billion euros ($19.2 billion)".
The economic benefits for the US will be insignificant, but the damage inflicted on America's alliances in Europe will be tremendous.
Moreover, Chairman Xi has just scored a major success in Italy, bring the first G7 country into the "Belt and Road Initiative". Washington is angry, while Brussels is concerned. According to Time Magazine, "China welcomes Italy into its sphere of influence, unnerving the EU and US". Trump's tariffs on European exports may become the last straw that will break the transatlantic relationship and push the European Union into the warm embrace of China. Some trade hawks in Washington seem to believe that the US is so crucial to the world economy that Washington can take on China, Germany, Russia, France and Venezuela simultaneously and still win. That's a bold strategy, but it's unlikely to work.
On 23 March, Reuters reported: "Italy signed deals worth 2.5 billion euros ($2.8 billion) during Chinese President Xi Jinping's visit to Rome, Deputy Prime Minister Luigi Di Maio said on Saturday, adding that the value of the contracts could rise to 20 billion".
What happens if the whole European Union defects to China, because China offers money, while Washington is inciting a trade war? Donald Trump once said that "trade wars are good and easy to win", but if China and Europe join forces against the United States, Trump's trade war on two fronts will likely become unwinnable.
The views expressed in this article are those of the author and do not necessarily reflect those of Sputnik.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.