Global Geopolitical Series: U.S.-EU trade agreement bad news for China

Yesterday, after meeting with European Commission President Jean Claude Juncker, President Trump announced that the United States has reached an agreement with the European Union in principle, which would formally begin the negotiation process with an aim to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods. Barriers would be reduced and trade is services, chemicals, pharmaceuticals, and agricultural products will increase. The EU would immediately increase imports of U.S. soybeans, along with an increase in imports of U.S. liquefied natural gas (LNG). Both parties would resolve the steel and aluminum tariffs as well as other retaliatory measures as part of the negotiation process.

This announcement is not really a good news for China, which was hoping to have the European Union by its side to retaliate against U.S. tariffs aimed at the rest of the world. More problematic for China is that the U.S. and the EU might actually team up to retaliate against the alleged malpractices of China with regard to trade as well as intellectual property.

The following parts of the press conference of Trump and Juncker clearly suggest so,

• During the press conference, Mr. Trump said, “We will, therefore, work closely together with like-minded partners to reform the WTO and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state-owned enterprises, and overcapacity.” These comments are clearly directed at China as President Trump has long accused China of all the above.
• Mr. Juncker concurred President Trump’s comments, “And we also agreed to work together on the reform of the WTO.”