US probe against EU could trigger a new trade war

The United States administration is reportedly mulling a new trad investigation against the Europe an Union as the window closes for hitting Brussels with tariffs on Europe an automobiles. Which means the EU could face a much broader US inquiry.

Although, the US and the EU have disputes in beef, automobile, steel and other trades, the "illegal aid" dispute between them, which goes back 15 years, could intensify the US-EU trade conflict, especially because of rising populism in both economies.

European aircraft and textile products－worth $1.6 billion and $1.58 billion, respectively－invited the highest amount of US punitive tariffs. In addition, agricultural goods such as cheese, olive products, frozen pork, liqueur, some types of fruits and coffee, and industrial products including shovels, bulldozers and printing equipment could also incur higher US tariffs.

The US-EU tariff dispute has flared up again over subsidies for aircraft makers Boeing and Airbus, and intensified after the World Trade Organization authorized Washington to impose tariffs on about $7.5 billion worth of European goods.

The five products high on the US tariff list are: new aircraft with manufacturer's empty weight of more than 30,000 kilograms and other non-military aircraft (worth $1.6 billion) originating from Britain, France, Germany and Spain; textile products (worth up to $1.58 billion) from Britain; olive oil and other olive products (worth $1.55 billion); frozen pork, fresh cheese and olive products (worth $570 million); and liqueur (worth $550 million).

Considering the export structure of EU member countries, France and Britain will suffer most, as French products worth $2.75 billion and British products worth $1.86 billion face higher tariffs.

But the EU goods facing higher US tariffs account for a mere 1.5 percent of its total exports to the US, with the targeted French products accounting for 5.2 percent of the country's total exports to the US－and the percentages for Spain being 4.7 percent, and Britain and Greece 3.2 percent and 3.0 percent.

Given the US' import structure, this round of tariffs is likely to cause more negative effects on the US than the EU. More important, the US tariffs could ignite a US-Europe trade war, especially since major EU member countries responded in kind after the US Trade Representative Office released the tariff list.

For example, the European Commissioner for Trade Cecilia Malmström said the US' tariffs left the EU with no alternative but to take similar action including tariffs on Boeing imports, so as to defend the interests of European companies, farmers and consumers. And British International Trade Secretary Liz Truss said she was extremely disappointed, because the US tariffs could damage relations between the two countries.

The EU is beset with many a problem such as internal structural contradictions and rising populism. For example, the United Kingdom will hold general elections in December whose results are most unpredictable. And more importantly, the election results could decide the future of Brexit and even the development prospects of the EU.

As the trade dispute between China and the US continues, any further escalation in the US' trade conflicts with other economies could seriously affect the prospects of European and global economic growth and thus create much bigger problems for the world economy.

Shi Xianjin is a post-doctoral candidate at the National School of Development, Peking University, and Dong Yan is a researcher at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The views don't necessarily represent those of China Daily.