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New trade war: Why Trump introduces duties against France, Brazil and Argentina?

Author : Georgiy Kuhaleyshvili

Before the trade war between the United States and China ended, on Monday, December 2, President Donald Trump shared plans to introduce a 100% duty on 63 types of goods delivered to the United States from France
23:32, 4 December 2019

vox.com

The blacklist will include champagne, cheeses, soap, bags, cosmetics, clothes worth $ 2.4 billion. This is the answer Americans are preparing for the introduction of a 3% tax in France for foreign high-tech companies. The American leader also expressed his intention to introduce duties on steel and aluminum from Brazil and Argentina under the pretext of manipulating the exchange rate ин the governments of these countries. Trump continues his protectionist policy in order to derive political benefits on the eve of the presidential election in 2020 and put pressure on the leadership of other countries. However, this may result in a growth of misunderstanding in US relations with European and Latin American partners.

French challenge

The United States may impose duties on products from France, Brazil, and Argentina based on applicable laws. Under Section 301 of the 1974 Trade Act, the United States may increase duties on goods from countries that cause losses to American companies. Section 301 is at variance with WTO rules and violates the principle of free trade, but the Americans have already applied it to China.

Trump took drastic measures to tame French President Emmanuel Macron, who went too far, and his policies could be too expensive for US companies from Silicon Valley. French authorities have introduced a digital services tax for foreign high-tech companies with an annual turnover of more than 750 million euros, which work in France and earn 25 million euros per year by selling their products and services to French citizens. The American companies Google, Apple, Facebook and Amazon, which operate in the French market, must transfer 3% of the proceeds from profits in this country to the French treasury.

Macron needs money for spending on the needs of the social sector in order to reduce the degree of anti-government sentiment in society under the influence of yellow vests protests. The French president wants to get rid of the image of the "president of the rich", which was entrenched to him due to the refusal in 2018 to restore the luxury tax. Macron decided to make American companies his "cash cow." This precedent is extremely undesirable for American business, since other European countries may introduce similar taxes after France. Similar initiatives were considered in the UK, Spain, and Austria.

And also we see deterioration of US-French relations due to the disagreement of Trump and Macron on Iran, Syria, climate protection, the role of NATO for Euro-Atlantic security. Recently, the owner of the Champs Elysees has moved away from the White House: he considers NATO an ineffective organization, advocates the creation of an independent military-political bloc within the EU, and declares the idea of ​​rapprochement and cooperation in international security with Russia. Trump delivered an ultimatum to Macron - if he does not cancel the tax that is not profitable for the Americans in the near future, then French companies cannot avoid losses. Today, the United States is the main market for French wines. Its food and consumer goods are popular among American citizens. If the United States introduces the promised duties, then French products will increase in price and cease to be competitive in the US market. If duties do not work, then the Americans will impose restrictions on French firms that operate in the United States.

Punishment of Brazil and Argentina

Trump's rhetoric about duties on steel and aluminum from Argentina and Brazil should be taken as a punitive measure. The American president believes that the authorities in these countries artificially depreciated their currencies against the dollar to the detriment of the interests of American farmers. During the trade war, China inflated duties on American soybeans and other products of farmers from the United States, reoriented to purchase lower-priced agricultural products from Brazil and Argentina. Although the authorities of Latin American countries deny that they depreciated national currencies knowingly. They argue that it is all about macroeconomic processes, including fluctuations in oil prices.

Trump threatened to impose duties on steel products from Argentina to make it clear to President Alberto Fernandez who is the boss of the Western Hemisphere. Fernandez is a member of the center-left Hustisialist party, a former prime minister and student of ex-presidents Nestor and Christina Kirchner, anti-Americanists and representatives of the "left wave". By the way, Christina Kirchner, contrary to allegations of corruption, will take the post of vice president in his team and will play the role of a gray cardinal. Fernandez accused the United States of a coup d'etat in Bolivia and the resignation of President Evo Morales. The White House makes it clear to Fernandez and Kirchner in advance that they shouldn’t even think about trying to oust US interests from Latin America in an alliance with Russia and China. Otherwise, the Americans will strangle the Argentine economy. In 2018, Argentina shipped $ 700 million worth of metal to the United States. Steel and aluminum duties are just the beginning.

Related: Zelensky: Impeachment process against Trump does not influence work of Ukraine’s president

Brazil's far-right president, Jair Bolsonaro also fell short of Washington's expectations. Despite the fact that the Brazilian leader is in favor of strengthening relations with the United States, positioning himself as an opponent of socialists in the region, supported by Russia and China, the Americans did not wait for Bolsonaro active actions in Venezuela. After coming to power, Bolsonaro considered the option of armed intervention together with Colombia in the Venezuelan crisis to help supporters of Juan Guaido in the removal of President Nicolas Maduro. Trump does not want to conduct a military operation in Venezuela and, apparently, hoped that all his dirty work for the Americans would be done by their Latin American partners. However, things did not go further than strengthening the protection of the Brazilian-Venezuelan border and criticism of Maduro.

Trump's benefits

Trump's protectionist measures against France, Brazil and Argentina should be seen as a political maneuver in the election race and the struggle for the presidency with Democratic candidates. Trump defended American business at the right time when the question of his impeachment is being discussed. He is trying in every possible way to distract American society from the negative words in his address. The Republican Party has already prepared and published a large report in which they described in great detail why the arguments of the Democrats in favor of the impeachment of Trump have no basis, emphasized that the American president did not exceed his official authority and did not put pressure on the President of Ukraine Zelensky on the search for compromising evidence of Democratic candidate and former vice president Joe Biden.

Now Trump needs to instill confidence in his voters as only he knows how to defend American interests. Americans benefit from duties on French champagne and cheeses. In recent years, much attention has been paid to the development of winemaking in the state of California. American winemakers strive to improve the quality of their products, to do no worse than French brands. Fees on Brazilian and Argentinean metal are an attempt to enlist the support of American metallurgists and miners, who have been going through hard times in recent years. From Brazil and Argentina, the United States mainly imports steel billets, from which long products are made. Although orders for the production of semi-finished products could be placed at American plants. Trump works in the same way as during the 2016 election campaign, when he promised to return Americans jobs and clear the domestic market from foreign competitors.

Trump defended the interests of American high-tech companies in France for political reasons. Despite the fact that Republicans are in favor of modernizing the economy, Trump did not have a relationship with computer geniuses. They sympathize with the democrats. Trump accuses the Facebook leadership of the fact that the social network is full of information criticizing him. Trump is in a difficult relationship with Amazon and The Washington Post newspaper owner Jeff Bezos. The Washington Post often pours mud on the American president. The owner of the Oval Office decided to punish Macron with high duties in order to improve his image among critics from the Silicon Valley, to make it clear that despite the existing differences, he defends the interests of all Americans, regardless of political preferences. Trump is interested in lowering his degree of criticism at the height of the election campaign.

Negative consequences

As in the case of China, Trump clearly overestimates the importance of duties as a means of pressure on other states and underestimates the negative consequences for his country. Relations between the United States and France, which, along with Germany, is the most influential center of power in the EU, will become even worse than it is now. French officials are not afraid of the prospect of a trade war with the United States. They refuse to cancel the tax for foreign high-tech companies, are ready to retaliate against the United States if Trump goes from words to deeds.

The French are going to push up other EU member states for a US response. European countries may join France’s anti-American action in response to a US $ 7.5 billion package of duties on EU goods as a punitive measure for illegal subsidies from the European budget to French aircraft manufacturer Airbus, a competitor to the American Boeing.

The trade war will deepen the split in transatlantic relations, will become a factor in the rapprochement of the EU, China and Russia. So far, European countries of NATO perceive China as a potential threat, but as relations with the US deteriorate, the situation will change in favor of China, where French wines and delicacies are also in demand. Macron is thinking about the future and is already agitating Europeans for closer cooperation with Russia.

Protectionist measures against Brazil are unjustified. If in Argentina the Americans want to destroy the 21st century socialism being revived through the efforts of the tandem of Fernandez and Kirchner, with the help of duties at the very beginning, then in the case of Brazil it looks like a shot in the back of a regional partner. Brazil is the most influential and developed country in Latin America, which claims to be a regional leader. Trump puts pressure on Bolsonaro amid the unresolved crisis in Venezuela and political uncertainty in Bolivia after the resignation of socialist president Evo Morales. Brazilian metal fees will only worsen relations with one of the important regional partners of the United States.

The negative economic consequences of Trump's new duties will affect the Americans themselves. Prices for products of French brands will rise. U.S. enterprises contracted with metal traders from Brazil and Argentina will not be delighted with duties. Trump should measure seven times before cut once and open a new front of the trade war.

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