The Dow Jones Industrial Average rose 200 points as President Donald Trump took a lighter stance on Chinese investments in U.S. tech.
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By David Meyer
July 5, 2018

Good morning. David Meyer here standing in for Alan from a delightfully sunny Berlin.

Tomorrow sees the imposition by the U.S. of major tariffs on Chinese imports. The Chinese will also likely strike back with retaliatory tariffs on the same day (though China maintains it will not fire first, despite Friday arriving earlier there than in the U.S.).

The question now is whether China will stand alone in its trade fight against President Donald Trump, or whether it will find allies among others who are also being targeted by the White House.

According to the South China Morning Post, Chinese Premier Li Keqiang has proposed that the European Union—hit by U.S. tariffs on steel and aluminum imports—step up cooperation with China in order to ward off their common threat. “As two important forces in the world, China and the EU have to reach consensus, and expand cooperation and mutual interest to deal with the challenges,” Li told European Commission President Jean-Claude Juncker.

Meanwhile, the White House may be trying to pursue a divide-and-conquer approach among European countries. As the Washington Post reported last week, Trump earlier this year suggested to French President Emmanuel Macron that France should leave the EU in order to win a bilateral trade deal with the U.S. that’s on better terms than current U.S.-EU agreements—a ludicrous suggestion, as the EU market is worth a lot more to France than the American market is.

And Germany’s Handelsblatt has now reported that the American ambassador to the country, Richard Grenell, told big German automakers including BMW, Volkswagen and Daimler that the U.S. would be open to a zero-tariff agreement with the EU on car trade across the Atlantic. The German car firms’ CEOs were reportedly receptive to the proposal. The EU is trying to organize a united front across its member states in the face of Trump’s proposed tariffs on European vehicles and parts, so this could just be back-channel negotiating—or it could be intentionally divisive.

Either way, unless something changes suddenly today, we’re about to slip into a new phase of international trade relations. And we’ll soon know how alliances shift and coalesce in that new reality.

News below.

David Meyer
@superglaze

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