Policy Brief: Trump's Trade Wars. Implications for the EU and China

Trump's trade wars hit a new dimension expanding from mini to global trade wars. They target sectors (e.g., aluminium and steel) for the protection of "national security" (according to Section 232 of the Trade Expansion Act of 1962) and countries (e.g., China) for unfair trade practices (according to Section 301 of the Trade Act of 1974). Both legal instruments give the US President the power to impose sanctions and protective measures. Since Trump came in office, he has cancelled most multilateral agreements or projects the USA were previously involved (TTIP, TPP, NAFTA, Paris Climate Agreement, JCPoA). Whereas the US trade conflict with China escalated dramatically and could ultimately – beginning with 1 September 2019 as President Trump has threatened – affect all bilateral trade flows, the tensions with the EU are currently limited to aluminium and steel. However, a trade war with respect to cars could follow if no agreement on an US-EU FTA-light is reached, besides the agreement on increasing the share of duty-free imports of hormone-free beef from the USA, signed on 2 August 2019. We analyse the trade wars already underway (aluminium and steel; USA–China) and possible new conflicts (cars) and agreements (FTA-light) with two methods: 1. a static CGE model and 2. a global dynamic economic macro model. The comprehensive US trade war with China results in the biggest impact for the involved countries, followed by a possible car conflict and an FTA-light agreement.