Donald Trump Is Pushing Europe Into Asia’s Embrace

(Bloomberg Opinion) -- With friends like these, it’s wise to look around for some new ones.

Donald Trump has called the EU a “foe” and advised British prime minister Theresa May to sue the rest of the bloc over Brexit. The U.S. president has already levied tariffs on European steel, and is threatening to do the same on lots of other products, including cars. So it’s hardly a surprise that Europe’s leaders are turning eastward in search of new allies.

This week, the EU has signed a landmark trade deal with Japan, known as JEFTA, which will make it easier for European food producers to sell their products into Japan while further opening up European markets to Japanese carmakers. There was also a rapprochement with Beijing. For the first time since 2015, the yearly EU-China summit ended with a joint statement, as well as limited progress toward a bilateral investment treaty.

The two events are, of course, hardly comparable. The deal between the EU and Japan is one of history’s largest trade agreements. The two economic blocs have enjoyed strong political relations for years and share similar positions on trade. Conversely, the EU and China are at loggerheads on several important issues, such as China’s buying into high-tech European companies and the huge public subsidies enjoyed by Chinese state-owned corporations.

That’s one reason why Brussels has opposed the classification of China as a “market economy” at the World Trade Organization. Trade between China and the EU has risen sharply in the past two decades, but we’re far from any meaningful new trade or investment deal.

Yet even small steps are meaningful in relations between powers, and this week tells us something important about Europe. For all the differences between the EU and China, Trump’s bruising approach will encourage the mending of bridges between adversaries. The friendlier outcome from the EU-China summit shows this. For Japan and the EU, the motivation is even clearer. They had both negotiated, or were in the process of negotiating, a trade deal with the U.S. under the Obama administration before Trump decided to scupper both deals.

Of course, there’s no certainty that any EU “pivot to Asia” will actually succeed. The rise of anti-establishment governments, for example in Italy, is pushing the EU in a more protectionist direction. Italy’s Five Star Movement wants the country to not ratify a trade agreement with Canada, even though it has — for now — given its approval to the Japan deal. The risk is that Trump-style populists may oppose closer trading and investment relationships, especially with an expansionist China.

But the painful progress of Britain’s exit from Europe shows the limits of nationalist simplicity on trade. Ahead of the referendum, supporters of the Leave campaign argued that one big advantage of quitting the EU would be the freedom to pursue more favorable trade deals around the world. Yet the irony of the Japan-EU agreement is that Britain will probably end up having to replicate the same terms to keep Tokyo happy, something it will be at pains to do given the importance of Nissan and Honda to the U.K. economy. So much for freedom.

We’re still far from a realignment of the alliances that have dominated the post-World War II era. Brexit may still not happen, or happen in a very diluted manner. The U.S. may return to multilateralism should a new president replace Trump. But the EU is right to spread its risks. As extraordinary as this may sound, Asia looks a safer bet than America at present.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

Ferdinando Giugliano writes columns and editorials on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.

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