— This is the script of CNBC's news report for China's CCTV on July 7, 2020, Tuesday.
The new proposal was approved by the European Commission by an overwhelming 32 votes to three. Under the new proposal, the EU will take countermeasures if another country takes illegal trade measures and blocks dispute settlement.
Under the lawmakers' suggestions, the EU could retaliate even before a preliminary WTO ruling, which predates the Commission's original proposal.
Although action will have to be taken in consultation with EU governments, the passage of the proposal still reveals the EU's strong willingness to fight back, and that is very clearly pointed at the United States. For more than a decade, the European Union and the United States have accused each other of illegally subsidizing Boeing and Airbus, respectively, and each has appealed at the World Trade Organization.
But the WTO ruled last year that the European Union had improperly subsidized Airbus in 2004 and granted the United States the right to retaliate. Since then, the United States has imposed tariffs ranging from 15 percent to 25 percent on about $7.5 billion worth of EU imports last year. Last month, the US Trade Office stated that it is considering levying tariffs on goods imported from the UK/Germany/France/Spain worth approximately US$3.1 billion, and the maximum tax rate is raised by 100%. That is considered excessive by the EU. On Monday, European Trade Commissioner Phil Hogan said Washington had rejected to resolve the dispute. He also criticized a recent U.S. national-security investigation of EU goods, suggesting it could also be retaliation. Hogan said he wanted to reassure people that the EU was ready to take firm and decisive action if the US and The EU failed to reach an ideal outcome to their 15 years' dispute.
In addition to the new proposals, the European Union is increasing its regulation to American technology companies, some see it as part of the EU's retaliation response to the US.
Margrethe Vestager, the EU Commissioner for Competition Policy, recently explained in detail for the first time how they would regulate U.S. tech companies, Overall, U.S. tech giants will likely face more tax pressure in Europe, and subject to greater censorship, On the US side, Trump has not abandoned his threat to impose tariffs on cars imported from Europe, repeating the possibility several times this year.
If trade disputes between the US and Europe intensify, it could add additional headwinds to their economy recovering.
In its June update, the IMF forecast that the U.S. economy would shrink 8 percent this year. Among the major European Union members, Germany is expected to contract 7.8 percent, France 12.5 percent and Italy and Spain 12.8 percent.
We will keep an eye on the trade relationships between the US and EU.