What can the U.S. do now? The answer is: Not much. Instead of opting for a combination of quick results and a negotiating process seeking longer-term structural policy changes, Washington has chosen a path of litigation and imposition of reforms that China and the EU find unacceptable.

Anybody looking at the magnitude of U.S. trade deficits could have concluded that Washington had an excellent chance of using political leverage to quickly narrow its yawning trade gaps with China and the German-led EU — especially since neither the Chinese nor the Europeans were contesting the need that their systematic and excessive trade surpluses with the U.S. had to be reduced.

Germans, to be fair, were ready for concessions and actively seeking ways to initiate that process. It is not clear why things were allowed to go nowhere.

China, for its part, had a standing negotiating platform — "a win-win cooperation" — that could have served as a starting point. Instead of that, Washington and Beijing ended up trading blows in an escalating tariff fight.

Some observers now see a silver lining: They believe that a negotiating process will be unlocked after the mid-term Congressional elections early next month.

Let's hope they are right. But one thing is clear: Washington cannot allow the continuation of huge leakages of its domestic spending to Europe and China. At the moment, the strengthening household and business outlays in the U.S. are driving $670 billion of European and Chinese exports to the U.S.

That export volume is an 11 percent increase from the first eight months of last year, and a great gift to celebrate a revival of U.S. economic activity.

It's a gift because the combined European and Chinese surplus of $372.1 billion so far this year will go to their growing international creditor position, while the U.S. will have to keep issuing IOUs — that China and Europe don't want to buy anymore — to finance its $8.6 trillion of net foreign liabilities that the U.S. Department of Treasury reported at the end of the second quarter.

If you find that number chilling, here's more ice to the wound: America's net foreign liabilities increased by nearly $1 trillion during the second quarter of this year.