The Impact of the US–China Trade War on the European Union

From Global Journal of Emerging Market Economies

Since April 2018, the USA and China have been engaged in a trade war. Because of the importance of these two countries in world trade, this dispute does affect not only the Chinese and American economies but also the entire world. Several studies have shown the impact of this dispute on different countries in Asia, but little was done to study the effect on the European Union (EU) member states. 

This trade war has only worsened with new customs barriers and boycott threats. Neither of the two powers will be able to emerge victorious from this dispute. Already, in the USA, the consequences are felt in certain sectors of activity, such as agriculture, particularly because of the Chinese decision to no longer import American soybeans. 

Consequences of Trade War on World Economy and Third Parties 

Because of the importance of trade between the USA and China and their weights in the world economy, the consequences of this trade war are not limited only to the USA and China, but it is also likely that this dispute may provoke a possible global economic crisis today.

A Threat to World Growth 

There is a consensus among world leaders and banks about the dangers of the current US–China trade war on the world economy. For former US Treasury Secretary Lawrence Summers, the world is at the most dangerous financial moment since 2009. The possible weakening of the Chinese currency, Yuan, could, among other things, raise China’s borrowing costs and slow down the world economy. 

For Jean-Claude Juncker, the European Commission President, “The trade relations between China and the United States are difficult, they are contributing to the slowdown of the global economy” (Rampton, 2019). For the French bank “Société Générale” (Xu, 2018), the trade war between the USA and China might not lead to a global financial crisis but could impact the growth of Asian economies. This finding is shared by the IMF (2019); according to Ms. Christine Lagarde, the US–China trade war could reduce the level of global GDP by US$455 billion in 2020.

This article takes stock of European policy towards the USA and China in this trade war; it studies the consequences of the US-China trade war on the exchanges between Europe and China and analyzes the possible diversion created by this trade war for the European market.

Article details

The Impact of the US–China Trade War on the European Union
Sebastien Goulard
First Published March 2, 2020 Research Article
DOI: 10.1177/0974910119896642
From Global Journal of Emerging Market Economies