Europe Is Annoyed, Not Grateful, After Trump Delays Tariffs
Posted May 1, 2018 6:22 p.m. EDT
FRANKFURT, Germany — U.S. allies did not bother to conceal their annoyance Tuesday with the Trump administration’s last-minute decision to delay punitive aluminum and steel tariffs by a month, in their view leaving a sword of Damocles hanging over the global economy.
In Europe, the reprieve was seen not as an act of conciliation or generosity but instead as another 30 days of precarious limbo that will disrupt supply networks and undermine what has been an unusually strong period of growth.
European leaders, normally circumspect, are openly irritated that President Donald Trump’s protectionist assault is aimed at them despite decades of military alliance and shared values. The region has pushed for a permanent exemption to the U.S. trade penalties and threatened retaliation otherwise.
They find it absurd that Trump is risking a trade war with Europe, the United States’ biggest trading partner, rather than joining forces to rein in Chinese trade practices they both oppose. And the European Union’s cautious, often ponderous approach to policymaking is now clashing directly with Trump’s unpredictability and aggressiveness.
“The U.S. decision prolongs market uncertainty, which is already affecting business decisions,” the European Commission, the EU’s executive arm, said in a statement Tuesday.
While the commission said it was willing to continue negotiating, it was hard to see how the two sides would find common ground.
The White House wants to reduce what it maintains is the U.S. trade deficit with the 28-member European Union and is seeking concessions, such as lower tariffs on American cars sold here. Speaking to a group of steel executives Tuesday, White House trade adviser Peter Navarro insisted that the administration would take a tough line toward Europe.
“The guiding principle of this administration from the president down to his team is that any country or entity like the European Union which is exempt from the tariffs will have a quota and other restrictions, which are necessary to defend the aluminum and steel industries from imports in defense of our national security,” Navarro said.
But the Europeans say they will discuss the Trump administration’s concerns only after the bloc receives a permanent, unconditional exemption from the tariffs. They regard the tariffs as illegal under global rules.
“We will not negotiate under threat,” the commission said in the statement Tuesday.
The unusually grumpy tone of the statement from Brussels highlighted the enormous cultural gap. The European Commission prizes deliberation and procedure, while the Trump administration shows a penchant for ad hoc decision-making, exemplified by its announcing the latest reprieve just hours before the deadline.
“There is huge frustration with the way the administration is doing business,” said Mujtaba Rahman, managing director in London for Eurasia Group, a consultancy.
Economists say the biggest danger to the global economy is not so much the tariffs as the insecurity they sow among business managers trying to plan where to buy or sell products that contain steel or aluminum. Big metals consumers like auto manufacturers and construction firms have been stockpiling supplies, girding for a disruptive trade war.
“As a result there is a visible surge in steel prices in the U.S., which negatively affects manufacturing and many other sectors,” said Max Finne, assistant professor of operations management at the University of Warwick in Britain.
Trump’s provocative approach has fueled anxiety in Europe that the long-awaited economic recovery is losing momentum. The threat of a trade war adds to a list of risks that are making businesses less willing to invest and create jobs, including the imminent end of European Central Bank stimulus, Britain’s planned exit from the bloc and political deadlock in Italy.
Recent surveys have shown that confidence in Europe is flagging. British manufacturers’ expectations for future business hit a 17-month low in April, partly because of fear of trade barriers, the research firm IHS Markit said Tuesday.
“The latest extension has created enormous insecurity for companies,” Dieter Kempf, president of the Federation of German Industries, a lobbying group, said in an email.
The European Union regards the planned tariffs on steel and aluminum as a violation of international treaties and has already complained to the World Trade Organization, normally the arbiter of trade disputes.
The complaint lays the groundwork for the bloc to impose retaliatory tariffs on a long list of American products — including bluejeans, bourbon and Harley Davidson motorcycles — as early as mid-June.
While officials in Brussels have said they do not want to reward the Trump administration’s breach of international rules with concessions, Germany — the country with the most to lose — has indicated a willingness to be more flexible. Steel accounts for about one-fifth of German exports outside the European Union, and German carmakers like BMW and Daimler would be hit the hardest if Trump acts on threats to penalize vehicle imports.
Martina Fietz, a spokeswoman for the German government, said in a statement Tuesday that it was important for the European Union to continue talks with the United States and “develop a trade agenda that is in the interests of both sides.”
Peter Altmaier, the German economics minister, went further. “Personally I believe we should make an offer, something concrete, that would be the basis for further talks,” Altmaier said in an interview with Deutschlandfunk radio before the extension of the exemptions was announced.
Altmaier’s statement was at odds with the European Commission’s refusal to negotiate until the Trump administration removes the threat of steel and aluminum tariffs. The potential for a rift between Berlin and Brussels raised the possibility that Trump would succeed in rattling European unity.
Two members of the European Parliament complained Tuesday that French President Emmanuel Macron and German Chancellor Angela Merkel had undermined the European position when they discussed trade with Trump during visits to Washington last week.
“This open demonstration of different European priorities is deplorable at the moment of high political tensions,” Yannick Jadot and Sven Giegold, members of the environmentalist Green faction in Parliament, said in a letter to Cecilia Malmstrom, the European trade commissioner.
Some German business groups have begun calling for Europe to use the dispute with the United States to reopen negotiations about a broad trade agreement that would largely eliminate tariffs and reduce regulatory impediments, for example by agreeing on common safety standards for cars. The statement by Fietz on behalf of the German government hinted at that theme, saying, “Both the USA and European Union would profit from further deepening of the trade relationship.”
The Obama administration pursued such an agreement for years but it was largely moribund even before Trump took office, in part because of popular opposition in Germany.
Renewed negotiations on a comprehensive pact would in theory provide a venue to address Trump’s complaint that Europe profits from the trade relationship more than the United States — a contention disputed by economists.
But the chances for such talks are probably slim given Trump’s disdain for the European Union and his complaints about German cars. Trump said in March that if Europe retaliated against American products, he would tax imports of European vehicles into the United States, which in practice would hit the German automotive sector.
China, whose support for state-owned firms and restrictions on outside investment have long frustrated politicians on both sides of the Atlantic, presents another opportunity for Europe and the United States to make common cause.
Rahman of Eurasia Group said that secretly, some European leaders were happy that Trump had challenged China, whose large and increasingly sophisticated economy is a threat to Europe.
Europe would be happy to cooperate with the United States to press China on issues such as protection of intellectual property. But in the current climate it seems unlikely that the European Union and United States are capable of joining forces.
“The way Trump is going about it may not be the most effective, but he’s put it on the agenda. There is some sympathy for that,” Rahman said. “But it’s very difficult. The process seems completely broken.”