According to an internal memo circulated among EU governments and obtained by Bloomberg, the global trade war is about to get worse and the rules-based system of international commerce is expected to revert to an environment where the strong impose their will upon the weak.
The memo by the European Commission says that the disputes between the US and its closest trading partners are set to escalate in the coming months, “as more unilateral measures are threatened and imposed, leading, in some cases, to countermeasures or to mercantilist deals.”
The warnings come as the export-based European economic model risks crumbling under pressure from US President Donald Trump, who imposed tariffs on steel and aluminium imports from Europe and is now threatening a 20 percent tariff on European cars, a measure that would deal a massive blow to the EU’s auto industry.
The memo outlines three main drivers of the upcoming trade crisis:
- Gaps in the rulebook of global trade “leading to distortions, many of which associated with non-market policies and practices in major trading nations, that the WTO does not seem able to address adequately”
- Aggressive unilateral actions by the U.S. targeting allies and foes alike with punitive tariffs
- The U.S.’s decision to block appointments of members to the World Trade Organization’s Appellate Body that serves as the final arbiter in trade disputes.
The EU is developing proposals to revamp WTO rules, as it seeks to save it from what it sees as an all but certain demise.