Trade wars: the options for Europe

European Council President Donald Tusk, Japanese Prime Minister Shinzo Abe and European Commission President Jean-Claude Juncker shake hands after agreeing on a free-trade deal
Europe can respond to U.S. protectionism by concluding bilateral free trade agreements with other partners, like the one signed in July between the EU and Japan (source: dpa)
  • The Trump administration continues to engage in anti-free trade policies
  • Europe could respond by doing more free trade
  • Doing so would increase its geopolitical influence

The outlook for international trade does not look very bright. United States President Donald Trump seems determined to pursue an international order in which trade is characterized by bilaterally balanced flows between countries (U.S. and China) or between regions (U.S. and the European Union). So far, the consequences of President Trump’s recklessness have been limited. World growth prospects have not shrunk dramatically. Comparisons with the 1930s are misplaced and misleading.

This is because in today’s free-market world, the major benefits of international trade originate from the pressure companies feel from competitors (both incumbent and potential). Companies know that their survival is at risk if they fail to innovate and progress. In turn, innovation and progress produce growth.

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