The Guardian • Issue #2105

Europe being drawn into US trade war

International trade

Photo: pexels.com (CC0)

There has been a meeting of G7 finance ministers and central bankers high on the agenda was China and how the G7 should respond to America’s new round of trade wars with China. US Treasury Secretary, Janet Yellen made it clear that the members of the big capitalist club had a job to do. That job is to harm China’s economy, despite the fact that this will mean damaging the world economy in the process.

The European Union has announced that it will impose extra tariffs of up to 38 per cent on imported Chinese EVs. It is a move that is aimed at disrupting the Chinese economy, but could devastate the global economy.

The move to protectionism in Europe sits uneasily with some member-states. Germany, Sweden, and Hungary initially opposed the idea. German Chancellor Scholz  warned that protectionist policies and trade barriers “makes everything more expensive, and everyone poorer”. Germany relies on exports and sees the danger of  a tit-for-tat trade war. Trade wars are, in the words of Germany’s trade minister, Christian Lindner, “all about losing.”

Before the G7 meeting, President Biden seriously increased tariffs on Chinese imports higher than the ones imposed by Trump. Yellen used the G7 meeting to insist that the EU and the G7 should ‘forcefully’ confront China’s economic rise.

The USA is fearful of imports of Chinese green-technology products, and a “reliance” on China for solar panels, batteries, and electric vehicles. Yellen declared that she wants China to “face a wall of opposition.”

This should ring alarm bells. Yellen seems to be keeping her fingers crossed that China will not defend its economic interests. Responding to Biden’s economic attack she said that she “hopes” China won’t retaliate.  It is certain that they will.

China responded immediately. A statement said that “advanced economies are more interested in stirring up tension rather than promoting peace and cooperation … . If the so-called US allies blindly follow Washington’s path of protectionism and conflict, their economies and consumers will face major losses.”

Gao Lingyun, from the Chinese Academy of Social Sciences, in an interview, commented that “there is no doubt in my mind that China will take countermeasures.”

The fact that there is an obvious element of coercion on the part of the USA was not missed in China. Li Yong, from the China Association of International Trade, commented that “G7 politicians are following the US out of political considerations. There is only one way for [the USA] to be able to achieve this: political coercion against the economy and capital.”

Capitalist regimes say they love the “free market.” This is the very opposite. The US wants to limit and crush China. It is also dragging its “partners” into an economic downward spiral.

To promote a new round of trade war and protectionism verges on economic suicide. EU countries may make statements in support of blocking Chinese products from entering the European market. They might try to make it sound a positive thing. They might go so far as to accuse China of ‘unfair trading’ which is a nonsense. The reality is that these economies are, in the face of a crumbling globalisation,  promoting a dangerous policy of economic nationalism. The European economy as a whole is in tatters. The crisis in capitalism has become acute. The act to raise protectionist barriers is a desperate attempt to stave off the tsunami of crisis. It is at best a short-term buffer. Tariffs have never resolved capitalist crises. Protectionism has historically led Europe into war.

Protectionist policies, tariff walls and trade war harm the working class in all countries as economic downturn leads to recession and to austerity measures. The IMF, pre-empting the latest round of trade war attacks, predicted a potential loss of GDP of up to 4.7 per cent in some economies. This is where US capitalism is leading us all.

Capitalist globalisation has begun to unravel. It was a policy that sought to redress the crisis in capitalism and the tendency for profit rates to fall. It briefly held back the tide. When the crisis returned, nation-states returned to economic nationalism and protectionism. The crisis has not gone away, but China’s path to socialism has seen its economic growth eclipse that of its capitalist rivals.

The anti-China protectionist campaign can only result in economic hardship and a weakening of an already stagnant global capitalist economy

For the US it is a case of economics being war by another means. There are precious few carrots and a whole lot of sticks.

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