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Trump and Europe are teaming up against China on trade

Rick Newman
Senior Columnist

President Trump called it “a very big day for free and fair trade.” That’s Trumpian hyperbole, but the president’s new efforts to smooth out trade disputes with Europe include one major new development.

After meeting with European Commission president Jean-Claude Juncker, Trump hosted a short press conference to highlight what transpired: There’s a new goal to eliminate tariffs on many goods traded between the two regions and to “resolve” Trump’s new tariffs on steel and aluminum imports. Europe pledged to buy more American energy and agricultural products. And the two giant economies will try to improve cooperation on technical standards, which could ultimately boost trade.

The last point Trump mentioned may be the most significant, however. Trump said the United States and Europe will work together to “address unfair trading practices,” including “forced technology transfer,” “theft of intellectual property” and “overcapacity.” Neither man mentioned China, but that’s exactly who they were talking about.

President Donald Trump and European Commission president Jean-Claude Juncker speak in the Rose Garden of the White House, Wednesday, July 25, 2018, in Washington. (AP Photo/Pablo Martinez Monsivais)

Virtually all advanced nations have the same complaints about China: It forces foreign firms to turn over key technology as a condition of doing business in the country. It copies or steals trade secrets belonging to foreign firms. And it subsidizes giant companies that produce steel, aluminum and other commodities, allowing them to undercut foreign rivals on price, gobble up market share and drive foreign competition out of business.

Trump has tried to address those problems, mostly by slapping tariffs on Chinese imports and insisting that China reduce its trade surplus with the United States. Most trade experts say that won’t work. But joining with allies and pressuring China together could work, they say. And the place to start is at the World Trade Organization, the mysterious, globalist, technocratic trade arbiter Trump has repeatedly bashed, to the delight of his supporters.

Reforming the WTO

Trump has moved toward the mainstream, at least for a while. Trump said Europe and the United States will work with “like-minded partners” within the WTO to address China’s trade abuses. That’s a good idea. The United States and dozens of other nations formed the WTO in 1995, when China was still a fledgling, developing economy that qualified for more protections than advanced economies. China entered the WTO in 2001, opening the door to becoming the export colossus it is now.

China is now the world’s second-largest economy, and there’s no other nation that intervenes in the economy on the scale China does. The trade honchos who formed the WTO in the 1990s never quite foresaw that, and the WTO lacks many of the tools to deal with China’s unique economic model.

Reforming the WTO to bring China to heel would be the kind of drawn-out, detail-oriented forward crawl that Trump seems to despise. So his interest could wane and he might not follow through. But of all the moves China should fear, a revamped WTO that sharply limits China’s ability to pump government money into giant, home-grown firms is probably more threatening than Trump’s tariffs.

Other trade announcements Trump made were less impressive. Trump said the two regions would work toward zero tariffs on “non-auto industrial goods.” Fine, but autos are the biggest sticking point between Trump and Europe, not fruit or leather or bourbon. And there was no mention of any action on autos. That means Trump’s threat to put a 20% tariff on all imported autos remains, which would roil the industry if it were to happen.

Both sides also emphasized that they were beginning “talks” to lower trade barriers between the United States and Europe, without any actual commitments. And Trump and Juncker both indicated either party could terminate the agreement, which means it’s more of an agreement to try to agree than anything tangible. Still, Trump’s bluster was subdued and he didn’t insult anyone. Maybe it was a big day after all.

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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman

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