World Economic Forum Annual Meeting in Davos, 2023
Even before August 1 ended, Japan, South Korea and the European Union had already capitulated before Donald Trump’s threats – signing trade agreements in which they accepted 15 % tariffs on their exports – in exchange for US investment promise.
The inability of the European Union, Japan and South Korea to set up coordinated resistance against American commercial pressure has placed the fundamental weaknesses among the traditional allies of America.
At the same time, write Winston Mok In an opinion article, this fragility potentially opens doors to which rival economic blocks strengthen their positions.
According to the American investor of private equity and founder of Whoosh Air, before the period of 1 August given by Donald Trumpthe three economic powers capitulated the American requirementsaccepting 15 % rates about their exports in exchange for the promise of US investment.
Although these agreements initially They looked defeatallies can now even almost feel relieved, given the most severe treatment imposed on countries such as Canada, Brazil and India.
However, the 15 % rate to which the three (old) allies of the US are now subject is 50 % higher than 10 % enjoyed by Russia, willThe United Kingdom and Australia.
The approach to “Divide to conquer” Of Trump was remarkably effective, says Mok. THE Initial Agreement with Japan Essentially established a model that South Korea and EU were required to follow.
Unlike China, which faces tariffs greater than 100 % in electric vehicles and now few cars sells in America, these three economies are large car exporters for the American market.
The tariff offensive reflects Trump’s longtime complaint with what you realize how historical trade imbalances, particularly with Japan.
Since the late 1980s that the US President considers that tariffs are necessary corrective measures for decades of unilateral access to the market that allegedly damaged the American industry During the Cold War era.
Despite having a significant negotiation – including the mass scale of the EU market – these allies failed to use it effectively. According to Mok, the internal political turbulence severely harmed your answers.
The Prime Minister of Japan, Shigeru Ishibaleads a minority government that lost both legislative chambers, while South Korea has experienced prolonged uncertainty since President Yoon Suk-Youol’s dismissal From the position in April until the inauguration of President Lee Jae-Myung in June.
A EU also faces its own coordination challenges between member states, aggravated by the Ukrainian conflictin progress that requires continuous American support.
The authority of the committee’s chairman, Ursula von der Leyenit was even more weakened after having and suffered setbacks in budgetary negotiations.
In remarkable contrast, China managed the American pressure More strategically and coherently, demonstrating the advantages of centralized decision making about fragmented allied responses.
The failure to coordinate is an example of the classic, where the mutual cooperation could have strengthened the positions of all parts. Historical tensions, geographical separation and economic competition created Nunsponable trust deficitsMok’s note.
Although coordination with China could have increased its economic advantage, the geopolitical misalignment made such cooperation impossible.
Ironically, Trump’s aggressive approach may inadvertently end up foster cooperation between emerging economies.
O BRICS Group presents more attractive opportunities for coordinated negotiation, particularly when the Brazil and India They face high American tariffs as China prepares for potential tariff war climbing.
India’s position seems particularly vulnerable. Unlike China, which dominates the crucial product supply chain in the global economy, India lacks leverage in critical industries except generic medicines.
Your highly protected domestic market MINA MORAL AUTHORITY in commercial negotiations, while key exports such as jewelry and clothing remain easily replaceable.
However, Trump’s pressure could lead India to deeper cooperation with China. Both nations share interests as large Russian energy buyers and could benefit from expanded bilateral trade.
Raise Indian prohibitions on Chinese applications like Wechat and Tiktok, while China opens markets to Indian chemicals and pharmacists, could generate significant growth opportunities.
Although Trump’s immediate strategy seems to have been successful, the agreements obtained are inherently fragile. Environmental investment promises can provide political victories, but face practical challenges.
The relief currently felt by Japan, South Korea and EU with the result of the negotiations can run out in the short term, as short as Trump’s pressures accelerate formation of competing commercial blocks -undermining, in the long run, the US interests themselves.
