President Trump expresses frustration over the US importing more goods than it exports, but overlooks the surplus in services, which include finance, travel, engineering, and healthcare industries that drive a significant portion of the American economy, generating over $1 trillion in exports annually.
However, this service surplus also gives leverage to other countries to retaliate against US tariffs on goods, like the European Union’s ability to control US services entering its market.
For instance, the EU can utilize tools to limit and manipulate the flow of services traded within its bloc.
Europe holds significant leverage in services, explains Mujitaba Rahman, as the US excels as the world’s top service exporter, particularly in digital platforms like finance and cloud computing, resulting in a substantial surplus in services trade.
For instance, expenditures by foreign tourists in the US and consumption of American digital services around the world contribute to this surplus.
Many countries targeted by US tariffs, such as Canada, China, Japan, Mexico, and Europe, experience service deficits with the US, highlighting the importance of services in the global economy.
The EU possesses policy tools like Anti-course Equipment to retaliate against US tariffs, threatening restrictions on intellectual property rights and services trade, potentially impacting American tech companies like Google.
This dynamic could further escalate the trade war, with the EU historically regulating the high-tech industry more stringently compared to the US.
Source: www.nytimes.com