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Interesting trends in the area of goods trade between the EU and U.S., and between the EU and China have emerged recently. These trends carry possibility of increased global economic tension.

Media reports said:

The EU’s trade surplus in goods with the U.S. increased in the first two months of 2019 while its deficit with China widened.

According to Eurostat, the EU’s statistics office, the EU’s surplus with the U.S. grew to €21.6 billion in Jan-Feb 2019 from €20.9 billion in the same period of 2018, while with China, the EU’s trade deficit expanded to €37.8 billion from €35.5 billion.

The U.S. has hit the EU with tariffs. The EU’s ally has also threatened more in complaint over the trade balance.

At the same time, both the U.S. and the EU have complained that China wants free trade without playing fair.

Overall, the goods trade deficit of the EU has increased to €28.4 billion in Jan-Feb 2019 from €20.7 billion a year earlier.

Energy imports were the chief cause of the deficit, especially from Russia and Norway.

For the narrower 19-country euro zone, exports grew by 4.4 percent year-on-year in February and imports by 4.0 percent, leading to an expansion of its trade surplus to €17.9 billion in February from €16.5 billion a year earlier.

EU targets Trump’s heartland with retaliation plan

The EU has published its preliminary list of U.S. goods being targeted in a $12 billion plan for retaliatory tariffs over subsidies to Boeing Co., with a focus on farm products from areas that help form U.S. President Trump’s political base.

The European Commission began a public consultation Wednesday over the American products ranging from ketchup and nuts to video-game consoles and bicycle pedals.

The European Commission issued the 11-page document listing US goods being considered for additional import duties.

The long list covers a considerable amount of agricultural products, including fruits, coffee and tobacco, and extends to other spheres such as aviation. The possible levies may hit various items ranging from ketchup, vodka, chocolate and lobsters to video-game consoles, bicycle pedals, tractors, shovels and handbags.

A discussion on the proposed list is open until May 31 and the commission said it is up to the World Trade Organization (WTO) arbitrator to determine the exact level of countermeasures.

“European companies must be able to compete on fair and equal terms,” EU Trade Commissioner Cecilia Malmstrom said in a statement.

The Trade Commissioner’s statement said: “We must continue to defend a level-playing field for our industry.”

She added that the retaliatory measures are on the agenda so that the EU is ready “in case there is no other way out.”

However, the official stressed that the bloc still does not want to be embroiled in “tit-for-tat” measures and hopes that dialogue will prevail.

She said: “The EU remains open for discussions with the U.S., provided these are without preconditions and aim at a fair outcome.”

A 15-years battle

The U.S. and EU have been locked in a bilateral dispute at the World Trade Organization (WTO), with each claiming that Airbus and Boeing benefitted from illegal subsidies given to them. The two sides have been battling for almost 15 years over the matter, before it escalated, last week, when the US vowed to impose import tariffs on $11 billion worth of European goods.

In late March, the WTO appellate body confirmed that the US failed to comply with the organization’s rules on subsidies and “continued unabatedly its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus,” according to the European Commission.

The WTO will ultimately decide the level of damages the EU can seek, with a verdict possible toward the end of this year or in early 2020.

The EU retaliation plan follows a U.S. threat to seek $11 billion in damages through duties on European goods ranging from helicopters to cheeses to counter state aid to Airbus SE. Both moves stem from parallel, 14-year-old, disputes at the WTO over market-distorting support for aircraft makers.

The EU and U.S. are preparing for negotiations on removing industrial tariffs. The two sides are engaging in renewed sparring over aircraft aid and Trump’s “America First” protectionism, especially his controversial duties on foreign steel and aluminum based on national-security grounds and a threat he has kept alive to apply automotive levies on the same basis.

The EU imports of the goods on the preliminary retaliation list in the Boeing dispute have a total value of around $20 billion and the bloc would eventually apply duties on some or all of the products once the WTO sets the damages limit, according to the commission, the bloc’s executive arm.

The U.S. products also include casino game tables, tobacco-seed oil, vodka, orange juice and a range of foods including chocolate and frozen lobster.

So far, the EU has applied tit-for-tat tariffs on €2.8 billion ($3.2 billion) of U.S. goods in response to Trump’s metal duties and threatened to hit a further €20 billion of U.S. products with levies should Washington restrict automotive imports.

EU-China

In 2008, the EU had a trade deficit with China of €171 billion. There was a deficit throughout the period between 2008 and 2018, reaching €185 billion in 2018. During this time, EU exports to China were highest in 2018 (€210 billion) and lowest in 2008 (€78 billion). EU imports from China were highest in 2018 (€395 billion) and lowest in 2009 (€215 billion).

China is the top trading partner with the EU and accounted for 20% of EU imports in 2018. In terms of EU exports, China was the second largest export partner (11% of EU exports) in 2018, preceded by the United States (21% of EU exports).

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