Traditionally, the US and the EU have always been strong allies, sharing similar worldviews, interests, and actions. With the election of Mr. Donald Trump into the presidential office, many were concerned about the continuing relationships between the United States of America and some of its closest allies.
Tensions started rising between the EU and the US due to the numerous imposed tariffs on imports and exports. What once was a lucrative trade deal between the involved countries is now turning into an almost comical tariff standoff.
Let’s take a closer look at what exactly has sparked this ongoing trade conflict, and what we can expect from it.
US Goods Exported to EU in 2018
The trade of goods and services between the European Union and the United States totaled to over $1.3 trillion. Just the US goods exports to the EU came to over $319 billion, making the EU the biggest export market for the United States in the previous year.
The United States’ top export markets in the EU included Belgium, France, the Netherlands, Germany, and, of course, the United Kingdom.
Among the main exported goods were pharmaceuticals, optical and medical instruments, oil, machinery, and aircraft.
When it comes to agricultural products, the EU countries fall behind Canada and Mexico, becoming only the 3rd largest market for US agricultural exports.
Lastly, the exports of US services were up by 5.1% in 2018 when compared to the previous year. Here, we saw an increase in the export of professional and management services, travel and education, and intellectual property.
Goods Imported by the US From the EU in 2018
The goods and services imported from the EU to the US totaled to over $684 billion. Since the UK is now considered to be a country outside the EU, it’s become the European Union’s top export market, accounting for 16% of all exported goods and services. The US comes close behind, accounting for over 15% of all EU exports.
In 2018, China was the number 1 largest supplier of imports to the United States. All the EU countries together come in close behind and are ranked as the US’ 2nd largest supplier.
Last year saw an increase of 12.3% in the US goods imports from the EU. EU countries that became the top import suppliers include the Netherlands, France, Italy, the UK, and Germany.
Some of the most imported goods fall in the categories of pharmaceuticals, machinery, electrical machinery, vehicles, and optical and medical instruments. As far as the imported services are concerned, they include travel and education, transport, and IPR.
You learn more about the import-export statistics and the overall trade relationship between the EU and the US here.
US and EU Trade Relations Under Trump
During Mr. Donald Trump’s presidential campaign, as well as after his inauguration, the focus was on the America First foreign policy. His federal budget plan for 2018 was to increase spending on the military, homeland security, and veterans, as well as to cut spending on foreign countries.
The America First policy has brought about many changes. The US has withdrawn from and become critical of numerous multilateral initiatives. The US relations with its strongest allies, including the European Union, have been recalibrated, which has become a cause of concern for many.
The bilateral relations have been affected by the Iran nuclear deal, burden-sharing within NATO, trade, and the changed perceptions of the multilateral order.
Trump and the Tariff Increase
One of the primary causes of tension between the US and the EU since Mr. Donald Trump took office was the tariff increase.
In March 2018, Mr. Trump announced that he would impose tariffs on imports of steel and aluminum. Now, the US imports about $29 billion worth of steel and its top suppliers include the EU, Canada, South Korea, Mexico, and Brazil.
Aluminum imports account for about $17 billion and mainly come from 5 sources: Canada, China, Russia, the United Arab Emirates, and the EU.
The US trading partners haven’t only expressed concern over the new tariffs; they’ve expressed readiness to respond to these measures.
The new US tariffs have caused tit-for-tat trade measures, and they could cause further trade disputes and harm economic growth.
The Airbus-Boeing Dispute
President Trump’s administration might have added fuel to the fire and caused further escalation of tensions between the US and the EU. However, the trade dispute actually started back in 2004.
In 2004, the US filed a claim with the World Trade Organization (WTO) that the Airbus was unfairly subsidized. Airbus is jointly owned by Germany, France, Spain, and Britain’s BAE Systems, and is the world’s biggest aircraft manufacturer.
The EU filed a counterclaim, stating that Boeing, the US aircraft manufacturer, had received $23 billion in subsidies in the US.
Almost 15 years later, the WTO ruled that the EU had failed to end the Airbus subsidies. When it comes to the Boeing case, the WTO also ruled that the US had failed to stop tax breaks to Boeing, unfairly hurting Airbus in the process.
The ruling has cleared the way for both the US and the EU to retaliate.
The Back and Forth Tariff War
Earlier in April, the US has proposed tariffs on EU products worth over $21 billion. This includes everything from helicopters to essential oils and textiles.
They’ve proposed an extra 4$ billion on items such as Scotch and Irish whiskeys, cheese, olives, pasta, and more.
The EU’s countermeasure included imposing tariffs on bourbon whiskey, orange juice, motorcycles, and more.
Mr. Donald Trump further claimed that he would impose 25% higher taxes on EU cars imported to the US unless a trade agreement is reached.
It seems as if both countries are ready and willing to continue on with this tariff war, which can have dire consequences on both US and EU jobs, consumers, and companies exporting and importing goods and services.
The Bottom Line
The EU and the US are currently locked in their position. Trade relations seem to be only getting worse, and we’re not getting any closer to resolving these issues.