Another trade war is brewing between America and its European partners. It’s all about the new law, with the help of which the United States expects to stop inflation and attract companies developing “green energy” to its territory. In Europe, this law was called unfair competition and thought about countermeasures. How many trade wars the US and Europe have experienced and how the current confrontation will turn out – in the material of Izvestia.
New trade war between the US and Europe – reasons
The United States and the European Union are again on the verge of “trade wars” that began as a trade and economic confrontation between Washington and Beijing, but are rapidly acquiring a global character.
Inflation in the US has been rising throughout the year and reached a 40-year high in November. Over the year, prices rose by 9%, surpassing even the pessimistic forecasts of analysts. Fuel and food prices have risen the most. US President Joe Biden in June called high inflation the “curse” of Americans. And already in August, the House of Representatives found a solution to revive the economy. According to the new bill, from January 1, $430 billion will be directed to health care, green technology subsidies and inflation reduction. Of this, more than $370 billion will go to support clean energy and achieve climate goals. According to the plan, the buyer of an electric car in the United States will receive a discount of $ 7.5 thousand if the car is assembled on the territory of the country, and its batteries contain 40% of locally produced minerals. In addition, foreign companies that have moved to the United States will be provided with energy benefits – and this against the backdrop of a global industrial decline in Europe due to high tariffs.
Photo: Global Look Press/dpa/Hendrik Schmidt
Not surprisingly, in Europe, the US plans were called unfair competition and a threat to European industry. At least 9 points of the bill violate international trade rules and directly threaten VolksWagen and Renault electric cars. As the influential publication Politico explains, as a result, it will become profitable for companies to transfer production from the EU to the United States, and for customers to purchase American, rather than European electric vehicles.
In response, the EU is preparing protests at the World Trade Organization (WTO) and is developing its own package of subsidies. Germany is preparing to allocate €200 billion to compensate industrial and household consumers for gas prices, France – €100 billion. At the same time, the European Union is unsuccessfully trying to conclude a deal with the United States, under which European companies will also be admitted to American privileges. “If this spat now gets out of hand, it will lead to a trade war that will terrify the beleaguered Europeans,” the Politico publication says. It should be noted that disputes on the WTO site can be resolved for years, regardless of the urgency of the issue and the possible scale of the consequences.
Boeings and cheeses. How did the previous confrontation between Europe and the USA end?
This is far from the first conflict between two Western partners. The loudest new century was the dispute between Boeing and Airbus, which has been going on since 2004. Both sides accused each other of violating WTO rules and taking multi-billion dollar cheap loans. The consequences of this dispute were huge export duties on American goods in Europe and European goods in the United States. So, the administration of President Donald Trump in 2018 introduced a 25% duty on steel and 10% on aluminum. In response, the European Union imposed 25% tariffs on American goods. And if initially it was only about aircraft manufacturing corporations, then later other sectors of the economy of both sides fell under the distribution. High duties had to be paid for Scotch whiskey, French cheeses, olive oil and the famous American Harley Davidson motorcycles. The conflict was resolved only in 2021.
Photo: Global Look Press/Transport Photo Images/Leonid Faerberg
On his Twitter account, US President Donald Trump wrote: “Trade wars are good and easy to win.”
Four major trade disputes between the US and the EU
Trade conflicts in the Europe-US-China triangle have been known since time immemorial. The current disputes have become a logical continuation of the former competition of the largest economies.
The first tensions between the US and Europe arose shortly after the creation of the European Economic Community (EEC) in 1957. The so-called “chicken war” opened a series of disputes 1962 −1964 France and Germany imposed hefty duties on industrially grown chicken, which the United States conquered European markets: American poultry was several times cheaper for buyers. In response, a 25% tax was imposed on European brandy, light trucks and potato starch. Eventually, duties on starch, dextrin and brandy were removed, but light trucks were subject to them for another 48 years, and as a result, Volkswagen vans practically disappeared from the US market.
20 years later, in 1985, a two-year “pasta war” came to replace it. Europe ignored US complaints of discrimination against citrus fruits. As a result, the Reagan administration imposed duties on European pasta. Europe, in turn, added duties on US walnuts and lemons from the US. The dispute went on for two years, many articles in the press were devoted to it. The citrus dispute was settled in 1986, and the pasta dispute by the end of 1987.
Photo: Global Look Press/dpa/David Diaz
The “banana war” started by the EU in 1993 dragged on for almost 20 years. Europe imposed high duties on banana shipments from Latin America and almost completely banned the shipment of bananas to its colonies in Africa and the Caribbean. The owners of the plantations turned out to be North American companies. They turned to the World Trade Organization with claims, the consideration of which lasted until 2012.
The next stage was the “steel war” of 2002. The United States imposed duties on steel imports in order to revive the industry in the country and reduce unemployment. Steel duties were raised to 8 – 30% from the usual 0 – 1%, and affected European countries, while Canada and Mexico did not fall under the restrictions. Europe responded by raising duties on EU imports of oranges from Florida. Curiously, the main victims of the Steel War were the United States itself – costs soared in the automotive industry and among steel manufacturers.
“Steel War” flared up again in 2018when Trump imposed tariffs on steel and aluminum.
Many economists are unhappy with the trade wars as they are driving the world economy into an even deeper crisis. As Russian President Vladimir Putin said on June 24, the sharp increase in inflation in the world is the result of several years of irresponsible work of the G7 countries. In his opinion, politically motivated sanctions and a deliberate breakdown of cooperation ties are leading the world to a severe economic crisis.