International Trade: Where We Stand

International Trade: Where We Stand

It has been no secret that the trade relations between China and the United States have been getting progressively worse with each passing month this year. Nevertheless, it is important to also note that Donald Trump still has his aim up at other trading partners of the US, such as Europe and Japan. This week we wanted to take another look at those situations and see if there are any impending shocks coming to the financial markets.

To begin with, the European Union is having a special meeting to discuss trade today. It is very likely that the EU leaders would discuss the specifics of the deal previously reached in July between Trump and Jean-Claude Juncker when a massive tariff on the European car industry was successfully avoided. At the time the terms of the deal were not publicly announced but President Trump seemed confident that his requirements were met by the chief EU Commissioner’s promises. Whatever the two of them discussed, a key tariff of 25% on car imports from the union was put on hold. Nevertheless, there hasn’t been much progress in that respect when it comes to actual policies implemented. Other European leaders, as well as representatives of the United States, are getting nervous that the deal will be cancelled if more specific action is not implemented soon.

Juncker himself expressed the view that the European Union is often slow to act (and react) because of basic unanimity rules, i.e. decisions have to be made only when all member states agree. He stated that instead there should be a standard majority rule, which would allow the EU to act even if only a couple of countries disagree on a certain action, as long as more than half of the members support it.

Japan, on the other hand, is holding continued negotiations with the United States regarding trade. Earlier today the Japanese government confirmed that they will be expecting US Vice President Mike Pence for official talks next month. The visit is supposed to deal primarily with trade and other forms of economic cooperation between the two countries. Another topic very likely to come up is North Korea. The recent warming of the relationship between the US and North Korea has been largely with South Korea’s help as a negotiator, but Japan is another country with a huge stake in the matter (especially considering that other than South Korea, Japan has often been at risk during missile testing from North Korea). Japan hasn’t been included in the peace talks with North Korea yet, but is also very eager to see the denuclearization of the Korean peninsula.

Japan became one of Trump’s chief trade interests because the country has a trade surplus with the United States that amounts to roughly $69 billion. Perhaps most notably, Japan is known for its huge car manufacturing industry and exporting quite a lot of automobiles to the United States. President Trump is hoping that the negotiations would lead to a more even relationship between the two and he is likely looking to force Japan to import more American goods. However, there isn’t much that Japan can add to its list of US imports. Agriculture is one sector that US negotiators might have their eyes on, but the truth is that many American products do not meet Japan’s standards due to the United States’ extensive use of genetic modification techniques, as well as Japan’s own ability to produce prime quality food. This might put Japan in a very tough spot.

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