Trade disputes: the state of play between China, Europe and the US as tensions continue to escalate

Wed 24 Jun 2020
Posted by: William Barns-Graham
Trade News

eu china usa

Disputes between the US, China and Europe continue to dominate the global trade agenda, with potential deals between the global powers hitting stumbling blocks in the last week.

In what the FT is calling ‘a fast-approaching transatlantic trade conflict’, the US has suspended talks with the EU over digital taxes, while negotiations for greater EU access to the China market are reportedly “lagging”.

Meanwhile the White House has found itself denying claims the current deal between the US and China is “over”.

We have a look at the latest developments in each relationship.

1. US-China

Relations between the US and China have been further strained by US allegations over China’s mishandling of the initial spread of the coronavirus and China’s perceived overinfluence in Hong Kong.

On Monday (22 June), US trade adviser Peter Navarro caused a stir in the markets when he said that the ‘Phase 1’ trade deal between the two nations, which put a pause to tit-for-tat tariffs in January 2020, was “over”.

President Trump has since tweeted to deny this and Navarro has himself pulled back on the claims, the New York Times reports.

2. European Union-US

Trade tensions between the EU and US have also been escalating since the US last year issued retaliatory tariffs on imports of pork, single-malt Scottish whisky, biscuits, cheese and other dairy products following a dispute on EU subsidies for Airbus.

Last week the US walked away from talks for a new global tax framework for technology companies and threatened retaliatory measures if European governments – including the UK – went ahead with current proposals.

The FT reports a letter from US Treasury secretary Steve Mnuchin warning the talks had reached an “impasse” and that the US would not agree to even an interim deal as it would affect leading US digital companies disproportionately.

France, Spain, Italy and the UK have been campaigning for the new tax on companies like Apple, Facebook and Google, arguing that they make huge profits from the European market while making minimal contributions to public finances.

3. China-European Union

Talks on a new EU-China deal on trade and investment are also reported to be “lagging”, according to the New York Times.

The EU is seeking greater market access to China, calling the current relationship “unbalanced”.

China is currently tightening control over its domestic economy as a response to the coronavirus outbreak and is not seen as fully committed to the current talks.

The UK has also spoken out against Chinese influence in Hong Kong and is reviewing its deal with Huawei for the building of it 5G infrastructure.

4. WTO caught in the middle

The WTO – which is currently searching for a new leader – is increasingly caught in the middle, as the organisation responsible for maintaining a rules-based system in global trade.

The US has criticised the body for not effectively controlling what it sees as China’s overreach in global trade, with the US trade representative in Geneva recently calling the body “a mess”.

The country continues to block appointments to the WTO’s critical Appellate Body, which rules on trade disputes.

However, Paul Blustein, a senior fellow at the Centre for International Governance Innovation, has argued the Trump administration poses a bigger threat to rules-based international trade.

In his new book, titled ‘Schism: China, America, and the Fracturing of the Global Trading System’,  he accuses the White House of “flagrantly violating” WTO rules.