The US$31 trillion arena of international commerce has withstood a series of shocks in recent years, including the US-China trade war. This time, the linchpin is the European Union — caught between preserving its self-styled role as defender of multilateral rules and fearing the loss of millions of jobs and tens of billions in investment while the US and China wield market-distorting subsidies and tariffs.
The world’s three dominant economies are entering a combative phase that threatens to deepen fractures and challenges decades of free-market orthodoxy as the US uses trade weapons borrowed from China’s playbook, leaving Europe with big decisions to make.
Then-President Donald Trump fired the first shots with tariffs on China seven years ago, and then Joe Biden ushered America into the new industrial policy age. Stage three, punctuated by Biden’s latest round of duties on Chinese imports, builds on the first two: using tariffs to defend US interests, with subsidies now at the core of policy and without fear of retaliation.
