Germany May Be Involved If the Sino US Trade War Is Upgraded

Source: People's daily

The U.S. government's move to escalate trade frictions unilaterally, departing from the consensus of many consultations between China and the United States, has raised concerns about free trade and the global economy around the world.

Amrita Narika, economist and director of the German Center for Global and Regional Studies (GIGA), said that by provoking a trade war, the U.S. government could not achieve the so-called "U.S. priority" and "make the U.S. strong again" goals, but would hurt ordinary U.S. consumers and producers. Although there are differences between China and the United States on some issues, all these should be discussed and resolved within the framework of the World Trade Organization, rather than taking unilateral actions, which will only make the situation worse for all parties.

When talking about the impact of the trade war, she said two things were certain: first, if the escalation of the trade war continued, it would be difficult for a third party not to be affected by the whirlpool of trade protectionism. Second, while trade wars may increase employment in specific industries in the United States, they may also cause losses in other sectors of the economy.

Nalica pointed out that if the trade war is further upgraded, Germany may also be involved. "Assuming that cars exported from the United States are taxed, German automakers with factories in the United States will be adversely affected, and they will have to divert some of their production capacity in the United States."

"When people are in a development dilemma brought about by trade protectionism and have to restructure or modify global industrial chains, the costs are expensive, and the results are not conducive to the majority of participating countries and consumers." Nalica said.

According to Narika, the U.S. government's subsidy policy on U.S. agriculture is "a retrogression under the WTO framework". She said it was difficult for Europe not to follow suit by announcing $12 billion in agricultural subsidies. Subsidy wars between Europe and the United States are costly for both sides and are likely to create unsustainable debt and financial spillovers. If a war of agricultural subsidies breaks out between Europe and the United States, poorer developing countries and the least developed countries will be the victims, and they will be squeezed out of the market. "If the U.S. government returns to the old path of heavily subsidizing agriculture, it will trigger a series of reactions that will set back the functioning of the world economy for decades."

The wider the trade war escalated and spread, Narika said, the harder it would be for the U.S. government to protect ordinary consumers. Of course, such consequences and costs may occur in all economies implicated by trade wars. Contrary to Trump's assertion that America can win a trade war easily, a trade war means losing both. She believed that raising tariffs could not solve the problem and that countries should strive to establish mechanisms to promote the fair distribution of the fruits of economic globalization.