HOW TO FIGHT TRUMP’S ‘STUPID’ TRADE WAR: The European Union must strike back hard should Donald Trump make good on his promises to impose across-the-board tariffs on all incoming goods, and work to build a coalition of the willing at the World Trade Organization, according to Pascal Lamy, a former chief of the global trade body and ex-trade commissioner.
There are two scenarios for Trump’s tariffs, Lamy said. Either he goes ahead and slaps the tariffs across the board. “The second scenario, just as likely, is that this is a political weapon of coercion to gain advantages,” he added.
“You start by twisting the arm, but then you can let off a little pressure in exchange for a possibly hidden concession. It could be geopolitics, armaments, human rights, the environment, sanctions against China or favors to his entourage.”
“Mafia mode. It’s geopolitical machismo in its pure state,” he told Camille in an interview this week.
Just as it did during Trump’s first term, one way for the EU to retaliate is to target goods that are crucial to swing states or Republican constituencies.
The bottom line: Trump’s “diagnosis is stupid. This idea that the American trade deficit is a weakness of the United States is exactly the opposite. The U.S. trade deficit is a sign of its strength, because only the U.S. can afford such a deficit thanks to its international currency,” Lamy said.
Another ill-advised aspect of Trump’s tariff policy is that the burden isn’t going to fall on companies that export to the U.S. “He thinks that exporters pay the duties. Which is wrong, it’s the consumers who pay … Exporters can take a little out of their margin.” Add to that the fact that tariffs are only going to drive inflation in the U.S., and you have a recipe for disaster.
Two-fold solution: “My advice would be to take strong retaliatory measures, on the one hand. On the other hand, I would take the lead in a coalition at the WTO where members are free to respond to the U.S. measures according to their rights at the WTO, but commit among themselves not to provoke a contagion effect,” he added.
“After all, while the U.S. dominates the world economy, it only accounts for 15 percent of imports.”
Pascal LAMY 