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Pavel Kanevsky

PhD, Associate Professor, Department of Political Science and Sociology of Political Processes, Faculty of Sociology, MSU

A side effect of any trade war is protectionism, which is particularly pronounced during a period of structural transformation or the transition to a new stage of development in economic competition. The United States is the primary source of protectionism today. Donald Trump believes that protectionism is a new norm in international trade. According to this logic, the trade war with China will slow down the growth of the Chinese economy and give the United States time to build new capacities inside the country and restructure troubled industries.

It is also worth making a distinction between the trade tension in U.S.–China relations and the trade tension in U.S.–EU relations. The United States does not see the European Union as such problematic a trade rival as China. The optimum scenario for Brussels would be to see the United States and China return to the negotiating table, so that an increase in the imbalance between its main trading partners can be prevented. While most European experts insist that the European Union is ready for large-scale trade wars, they do not have any alternative scenarios. So, what is to be done in this case?

Moscow needs to think about strategies for minimizing the damage in the event that the protectionist policy adopted by the United States continues. On the one hand, new opportunities for trading with China are opening up, primarily in energy resources and a number of industrial sectors. On the other hand, Russia needs to understand that China’s export potential is huge, and if it loses the U.S. market, it will step up its pressure on other areas, including Russia. The type of protectionism espoused by Donald Trump is unlikely to benefit Americans in any significant way in the long term and could have a very negative effect on the very structure of world trade.


A side effect of any trade war is protectionism, which is particularly pronounced during a period of structural transformation or the transition to a new stage of development in economic competition. And we are not just talking about economic transformations here, but also social transformations – imbalances in the economy lead to social disruptions and failures on the labour market, and the national or supranational government must respond to this with protectionist measures. The greater the number of socioeconomic upheavals experienced by a country or group of countries, the greater the probability that protectionism will be adopted.

It is no coincidence that the primary source of protectionism today is the United States, since the U.S. working population has been exposed to changes in the global economy. And the political system was slow to react. The 2008 crisis served as a detonator for the explosion of new social inequalities and the uncertainty of the middle class. And while Barack Obama offered more social-democratic solutions to the problems, Donald Trump decided to protect the most troubled sectors, starting with the steel industry. This was not the first attempt in recent U.S. history to resuscitate this ailing sector. In 2002, when the logjam of issues in the U.S. steel industry became too apparent to ignore, the George W. Bush administration increased tariffs on certain steel products from 8 per cent to 30 per cent for all countries (with the exception of Canada and Mexico), which, incidentally, did not help put an end to the growing unemployment in the sector.

Yet the actions of Donald Trump differ from all the protectionist measures introduced in the United States in the past – and there have been plenty over the past century. The main feature is that, as Donald Trump believes, protectionism is the new norm of international trade. According to this logic, the trade war with China will slow down the growth of the Chinese economy and give the United States time to build new capacities inside the country and restructure troubled industries. Exactly how Trump intends to achieve this is another question, as protecting certain industries always involves costs to others. Countermeasures taken by the European Union, China, Canada and Mexico are already damaging U.S. agriculture. Trump sees the solution in multi-billion-dollar packages of state support, which may both help farmers and have a negative impact on inflation rates and public debt.

There are many examples in the history of American protectionism when large-scale campaigns to introduce tariffs either backfired completely or had no effect whatsoever. The infamous Smoot–Hawley Tariff Act of 1930, which raised tariffs on over 20,000 imported goods was the final nail in the U.S. economy’s coffin, plunging the country into depression. And in the 1980s, the United States imposed tariffs on the Japanese automobile market, but ultimately it only temporarily slowed down the crisis in the U.S. automobile industry, while Japanese cars, on the contrary, only became more competitive.

It is also worth making a distinction between the trade tension in U.S.–China relations and the trade tension in U.S.–EU relations. The United States does not view the European Union as a problematic trade rival compared to China. While relations between Washington and Brussels are marked by mutual suspicion, there is no reason to believe that the United States is planning to launch a trade war with the European Union that is similar in scale to the one it is currently waging against China. The recent truce between the European Commission and the White House is further proof of this. What is more, the European Union imposed tariff restrictions of its own in 2017, using the same logic as the United States – namely, that cheap Chinese steel is flooding the market too quickly.

The greater the number of socioeconomic upheavals experienced by a country or group of countries, the greater the probability that protectionism will be adopted.

The question thus arises: If the trade war with the United States continues, to what extent will China want to reorient its exports to the European Union? And to what extent will the European Union itself be ready for this? The optimum scenario for Brussels would be to see the United States and China return to the negotiating table, so that an increase in the imbalance between its main trading partners can be prevented. While most European experts insist that the European Union is ready for large-scale trade wars, they do not have any alternative scenarios. So, what is to be done in this case? In turn, the United States is more interested in pulling its European partners to its side in the escalating debate with China.

Obviously, in the near term, significant political, diplomatic and lobbyist efforts will be aimed at convincing Washington that it would not be wise to further unwind the protectionist flywheel. Anti-globalist sentiments are also evident in the European Union, although they are more pronounced in the south and in the Visegrád Group countries, which are experiencing deeper economic problems because of the imperfections in the trading system, than in the core – Germany, France and the Benelux countries. As long as Brussels, Berlin and Paris support free trade, the opinions of other European capitals will be of secondary importance.

As Donald Trump believes, protectionism is the new norm of international trade.

However, the stance of Donald Trump and his administration is not shared by the majority of the American establishment. Rather, we can talk about a serious internal political dispute which is threatened by numerous conflicts within the parties and among the branches of power. Donald Trump’s trade war has already split the Republicans in the Senate and the House of Representatives. Senators are actively discussing the possibility of adopting laws that would limit the president’s actions to set up trade barriers. In particular, this would mean that any tariff aimed at protecting national security needs to be discussed in both houses first. Republican congresspeople in the House of Representatives, who are on the whole more supportive of Donald Trump and do not want excessive escalation between Congress and the White House, believe that it is worth pursuing a policy of soft persuasion when it comes to the President. What is more, members of the House of Representatives, who are hostage to short-term electoral cycles, understand perfectly well that an open conflict with Donald Trump could jeopardize their own chances of re-election. On the whole, the Republican electorate is in favour of protectionist measures.

In the final analysis, the trade wars initiated by Donald Trump have so far only introduced uncertainty into the lives of everyone who is involved, directly or indirectly. Armies of lobbyists are stepping up their activities inside the United States and the European Union to ensure that negotiations are resumed. In the current situation, it is easier for Brussels to enhance their methods of persuasion that to start a massive and not entirely understandable reorganization of trade relations. The trade restrictions on Chinese steel does not mean that the European Union is prepared to enter a fierce trade war with China. Beijing also prefers to take a wait-and-see attitude, as quick alternatives to Western markets will not be forthcoming, even given the growing demand from developing countries. It is no coincidence that China is playing a role that it is not used to, namely that of the main proponent of free trade, as it needs to both preserve and expand its export capabilities. Despite the moderate protectionism that has always been characteristic of the European Union, it will pursue a policy to develop free trade with as many countries as possible, including in order to minimize the risks emanating from the United States.

The United States does not view the European Union as a problematic trade rival compared to China.

The majority of the less important trading powers will be forced to play the role of outside observers in trade disputes involving the U.S.–China–EU triangle. Russia is just one of these powers. For example, the agreement between Jean-Claude Juncker and Donald Trump for the European Union to buy more U.S. liquefied natural gas in exchange for freezing the duties on European cars will boost the argument of those who oppose Russian natural gas in Eastern Europe moving forward. However, stochastic calculations in the current uncertain conditions will do nothing to clarify the situation, as Russia will in any case be directly or indirectly drawn into trade wars should they gather steam. At the same time, there are objective factors that Russia will not able to influence. For example, if the trade war between China and the United States (and, to a certain degree, the European Union) drags on, then it will likely lead to a slowdown in the global economy and a fall in oil demand.

Proceeding from this, it is worth adding that Moscow needs to think about strategies for minimizing the damage in the event that the United States continues with its protectionist policy. On the one hand, new opportunities for trading with China are opening up, primarily in energy resources and a number of industrial sectors. On the other hand, Russia needs to understand that China’s export potential is huge, and if it loses the U.S. market, it will step up its pressure on other areas, including Russia. If Chinese goods continue to flood the global markets, then this will have a negative impact on the competitiveness of Russian products – from the food industry to electronics. For this reason, the continuation of the trade wars means that Russia will need to keep a close eye on the balance of trade with China and intensify trade in areas that will not harm domestic producers only. The wave of U.S. protectionism also offers up a great chance for Russia to declare the importance of preserving the spirit of international trade in Greater Europe and speed up the process of cooperation between the Eurasian Economic Union and the European Union, using the mechanisms of the World Trade Organization, among other things.

if the trade war between China and the United States (and, to a certain degree, the European Union) drags on, then it will likely lead to a slowdown in the global economy and a fall in oil demand.

In these challenging times for transatlantic economic relations, Eurasia may offer new opportunities for selling products, and the Eurasian markets could gain increased access to European technologies. However, great political efforts are required if this is to happen. Specifically, the situation in Ukraine needs to be resolved and the mutual sanctions need to be lifted, as both situations currently block any potential that may exist. However, offering access to the commodities market in exchange for technology is feasible with regard to other markets, for example Japan and South Korea.

The type of protectionism professed by Donald Trump is unlikely to benefit Americans in any significant way in the long term and could have a very negative effect on the very structure of the world trade. However, this opens up new opportunities for developing economic ties in the Eurasian space, which possesses huge trade potential but lacks political cohesion and developed infrastructure.

(votes: 2, rating: 5)
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Poll conducted

  1. Korean Peninsula Crisis Has no Military Solution. How Can It Be Solved?
    Demilitarization of the region based on Russia-China "Dual Freeze" proposal  
     36 (35%)
    Restoring multilateral negotiation process without any preliminary conditions  
     27 (26%)
    While the situation benefits Kim Jong-un's and Trump's domestic agenda, there will be no solution  
     22 (21%)
    Armed conflict still cannot be avoided  
     12 (12%)
    Stonger deterrence on behalf of the U.S. through modernization of military infrastructure in the region  
     4 (4%)
    Toughening economic sanctions against North Korea  
     2 (2%)
 
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