The EU sides with China against the US; but has Germany capitulated to America?

The whole world at rooftops. At the Canada G7 Summit the entire globe was at odds with the U.S. President. From left to right: EU Council President Donald Tusk, German Chancellor Angela Merkel, European Commission President Jean-Claude Juncker, American President Donald Trump, Italian Prime Minister Giuseppe Conti, Canadian Prime Minister Justin Trudeau, French President Emmanuel Macron, Japanese Prime Minister Shinzō Abe and British Prime Minister, Theresa May. Date: 09/06/2018. Location: Canada. © European Union, 2018 / Photo: Etienne Ansotte.

If billions of EU penalties on American icon companies and U.S. super tariffs on European cars are strong and aggressive trade weapons, then yes the EU and the U.S. are at all out economic war. As in all wars, the difficult or even impossible thing is to predict its end. Unavoidably, there will be victims on both sides. The White House started the conflict by imposing extra tariff on steel and aluminum imports.

The EU retaliated moderately with levies on US products of a value of €2.8billion. Now however things become serious in Brussels. American giant Google is threatened with a fine of $5 billion by the EU Commission for Android antitrust violations. Many people in Brussels say this should have happened a long time ago, but now the timing and the amount of the fine are very characteristic. Already Donald Trump has reprimanded the EU about that and left to be understood there will be in the future retaliation against EU companies.

A new American round

Presently though the U.S. is about to start a new round of trade skirmishes, by imposing levies on imports of cars. The EU prepares to answer with import taxes on US coal, pharmaceuticals and chemical products. It looks like the legions have crossed the Rubicon. The Europeans cannot back off, as long as the US opens new rounds of aggressive action. In Washington some people want to end it, but many others applaud noisily.

As for the Commission President Jean-Claude Juncker’s visit to the White House this Wednesday it’s not expected to change the basics in the EU-US relations. This is not an disease which can be cured in an hour of consultations. However the latest White House – Kremlin love affair is of a different kind. No doubt this latest Trump bombshell is related to the trade wars. Trump may have embraced Putin, but said he wants to kill the Nord Stream 2 natural gas pipeline project, meant to supply Germany with Russian fuel. The US too has gas for sale though.

What about Putin?

The sure thing is that Trump’s scheme to align with Putin’s Russia will facilitate the American operations against the other big guys. Trump has said it loudly and to the face of the other big players, notably Europe and China; ‘we made you big with our trade deficits but you now deny returning the favor’. Russia though hasn’t in anyway profited anything from the US trade deficits. This may play some role in Trump’s strategy. For other Americans though, Russia has a different but equally important function; it’s the ‘perfect enemy’.

A part, but not all, of the American Democratic Party keeps on exorcising Russia. The same is true for a part of the Republicans. They both express and protect the interests of that part of the US economy, which profits from the foreign deficits and the relations with Europe, China, Japan and South America, and considers Russia as No1 foe.

The U.S. schism

So, the American schism in relation to Russia crosses through the entire US political system, as does Brexit in Britain. In both those cases, nationalism, populism and outright lies and threats – a kind of modern fascism – is the arsenal of Trumpism and Brexitism. In many ways then, it’s more or less a clash of internal economic divisions, which activate Trump and the Brexiteers. This brings us to the left behind people.

Globalization has left a good part of the western societies destitute, in antagonism with the Chinese low qualification laborers. Exploiting this reality, previously second rate and marginalized populist politicians managed to express the interests of this destitute part of the population, by riding on nationalism. In many cases, those politicians now play a key role. Mr. Adolf Hitler rose to power by winning an election.

The main drivers

So, the main driving powers of today’s trade wars are a mélange of economic-political developments, plus the inertia which characterizes the great sociopolitical movements. Nationalism is a characteristic part of that inertia. So, it’s not just Trump who wants to wage wars to keep his voters happy. At the end of the day, the US citizens may be much worse off. It’s the newly spread horrors in a large part of the American ruling elites, fearing to lose the tight grasp on the world which the US had after WWII.

Trump wants to make sure that Europe, China, Japan, South America and Russia will continue serving as spokes of the American bicycle wheels. In the driver’s seat the New York banks to keep on milking the globe, with trillions of digital dollars created by themselves, on top of what they get from the Fed. During the past few years, the American central bank, the Federal Reserve has printed and handed out to New York banks $4.5 trillion.

The US exposure

Add to that, the foreign debt of the U.S., of which about $2 trillion is currently held by China, and the American exposure to the world cannot continue. The US economy has been growing robustly over the past two years. Yet, it couldn’t support the dollar’s overseas circulation through exports. So, the global trade flows have to change if America is to keep her position as the unquestionable ruler.

The problem for Washington, though, is this cannot be achieved in a controlled manner. The multilateral arrangements of globalization do not anymore favor the U.S. as they used to. So, the Americans think the multilateral rules have to go. That’s why Washington longs for bilateral trade agreements. Trump’s proposal to Germany for bilateral trade agreement of zero tariffs on cars, threatens to blow the European Union apart.

Europe also divided

Under this reality, Brussels rushed to sign a trade agreement with Japan, possibly without the full consent of Berlin. Germany was also on rooftops about the EU-China Summit of 16 July. That’s why, on 19 July, the European Trade Commissioner, Cecilia Malstrom, openly and actively sided with China, defending the independence of EU from the dictums of Germany. She said “Trying to force the hand of China with illegal action will not work, and the U.S. may end up breaking the multilateral system.”

On the opposing side, Angela Merkel had loudly but indirectly told Jean-Claude Juncker not to give much to the Chinese during the latest Summit. This was the mood when the Chinese Premier Li Keqiang was in Germany on 9 July. Berlin still doesn’t want – even as a member of the EU – to be seen by Washington as scheming against America by siding with her trade ‘enemies’. Seemingly, Germany still thinks she can save her car exports to America. All that internal EU cacophony was inconceivable one year ago. This is a very strong indication that the European Union is irrevocably at war with the US. The war has brought inherent inefficiencies of the club to light. This conflict truly threatens, if not to destroy, at least to freeze the life in the EU. Some say Europe has already capitulated to America.