EconomyHegemonic ShiftThe Macroscope

The U.S. trade war and the Asia-Pacific region

What happened?

Last week, Trump announced import tariffs on steel and aluminum, triggering worldwide responses of world leaders worried about an upcoming trade war. While the president of the U.S. stressed that trade wars “are good and easy to win”, world leaders emphasized that there are no winners in trade wars, only losers.

What does this mean?

In the short run, the world has responded with threats of retaliation. The EU has pledged to retaliate by imposing tariffs on American business-icons such as Levi’s, Harley-Davidson and bourbon and China has already mentioned Boeing as a target. However, in the long run, we might see allies of the U.S. strengthening their ties or forming new alliances in the Asia-Pacific region. Only several hours before Trump presented his plans, the renamed Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) was signed in Santiago without the U.S., which withdrew last year.

What’s next?

The CPTPP includes Mexico and Canada, the only countries exempted from the Trump deal and NAFTA partners of the U.S., showing that these countries are not afraid to look for other alliances. For the EU, we can foresee a similar path. Between 2013 and 2016, there were fifteen rounds of negotiation between the EU and the U.S. about the well-known TTIP. Within two years, we’ve gonefrom the globalized backdoor politics of TTIP to publicly threatening each other’s sectors and companies. Comparable to the struggles within the NAFTA, this quick shift in the outlook on trade between the U.S. and the EU may cause Europe to focus more of its attention on the Asia-Pacific region.