Trade wars not over yet, as Trump threatens tariffs on imports from EU

WASHINGTON • President Donald Trump is sending a clear message to the economic policymakers gathering in Washington for the International Monetary Fund (IMF) and World Bank's spring meetings: My trade wars are not finished yet and a weakening global economy will just have to deal with it.

With his latest threat to impose tariffs on US$11 billion (S$14.9 billion) in imports from the European Union - from helicopters to Roquefort cheese - the US President offered a vivid reminder that, even as he moves towards a deal with China to end their tariff wars, he has other relationships he is eager to rewrite.

That is not encouraging for global growth, with the IMF and others pointing to the uncertainty over Mr Trump's assault on the global trading system as a damper on business investment and sentiment.

Should they materialise, the new tariffs will be in retaliation for what the US has long claimed are illegal subsidies to Airbus and cap a 14-year fight between Boeing and its European rival at the World Trade Organisation (WTO). Importantly, the US has said that it will wait for the WTO, which has already deemed the subsidies illegal, to rule this summer on the exact amount of retaliation allowed.

That is potentially good news for the WTO and the broader system Mr Trump has often said he wants to blow up. The Airbus-Boeing fight also predates Mr Trump and it is fair to say any US administration would be willing to use WTO-sanctioned retaliatory tariffs.

"It's a good sign," said Mr Simon Lester, an associate director at the Washington-based Cato Institute. The Trump administration has been "sending some mixed signals about the World Trade Organisation, but this action suggests they still value playing by the rules".

But Mr Trump has deeper issues with the EU. And that is the problem hanging over the global economy, which the IMF predicts will grow this year at its slowest rate since the aftermath of the global financial crisis a decade earlier.

"The EU has taken advantage of the US on trade for many years. It will soon stop!'' Mr Trump said on Twitter on Tuesday.

The two sides have kept a fragile truce since July when European Commission (EC) president Jean-Claude Juncker and Mr Trump agreed to launch talks on reducing industrial tariffs. The move put on hold Mr Trump's threat to impose separate tariffs on imports of cars and parts from the EU.

But the negotiations have yet to get under way in earnest, with the EU's 28 members expected to give the EC the mandate it needs to begin talks only in the coming days, even as they cast a wary eye on European elections due next month.

The EU is not the only one in Mr Trump's firing line, of course.

The US leader has been able to use tariffs to force the EU, Japan and other trading partners into negotiations, said Ms Wendy Cutler, a former senior US trade negotiator now at the Asia Society.

"We're still in the same tariff world that we were last year," said Ms Cutler. "The question is, at what point does it backfire? At what point do countries just say enough is enough?"

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A version of this article appeared in the print edition of The Straits Times on April 11, 2019, with the headline 'Trade wars not over yet, as Trump threatens tariffs on imports from EU'. Print Edition | Subscribe