Trade

France tells Trump a trade war won’t go his way

France has a message for Donald Trump: America’s aggressive, go-it-alone tariff tactics are doomed.

Speaking to POLITICO, French Trade Secretary Jean-Baptiste Lemoyne warned that the U.S. president risks igniting a trade war by imposing tariffs on steel and aluminum, but insisted that his strategy would backfire.

“We are entering an era where trade war is starting to show its teeth. And we think that’s not good news,” Lemoyne said in an interview in a Brussels hotel. “American politics today — unilaterally putting in place a regime of additional tariffs on steel and aluminum — comes on the heels of a policy which aims to gut the dispute settlement system of the World Trade Organization.”

The U.S. president is using the threat of tariffs to pressure trading partners into new trade arrangements with Washington that he hopes will help slash America’s yawning deficit. Mexico and Canada, for example, have only escaped duties on the condition that they strike a new version of the North American Free Trade Agreement that will tilt the balance of trade more in America’s favor.

Lemoyne retorted, however, that there was no way that the EU, the world’s largest trade group, would be strong-armed into any sort of new transatlantic trade deal along those lines.

“This escalation in taxes and tariffs isn’t good for the American consumer” — French Trade Secretary Jean-Baptiste Lemoyne

In part, he explained, it was impossible to resurrect the idea of a transatlantic trade deal because Trump had quit the Paris agreement on climate change. That has become a red line for new EU trade deals, at France’s insistence.

“We have said that to strike trade agreements, this must be done with countries whose governments are party to the Paris agreement,” he said. “Potentially blocking us on steel and aluminum to force a free trade deal is not the right way.”

Trouble on the home front

Lemoyne also stressed that Trump’s tariffs would come back to bite the American economy. Beyond tariffs of 25 percent on steel and 10 percent on aluminum, the president is proposing a broader policy of reciprocity. That would mean lifting tariffs on, say, European cars because the EU imposes higher duties on motor vehicles than the U.S. does.

While Lemoyne said Europe stood ready to retaliate directly against targeted U.S. products, he argued that Trump would be deterred from a broader trade war when an arms’ race over tariffs ramped up prices for American consumers.

“This escalation in taxes and tariffs isn’t good for the American consumer,” said Lemoyne.

He added that recent U.S. tariffs on Canadian soft-wood lumber exports meant that American importers continued to import the Canadian wood but passed on the higher price to consumers. “In reality this type of measure can turn against the Americans themselves,” he said.

Lemoyne also insisted that Trump would fail in his attempt to disable the World Trade Organization as the global forum to resolve trade disputes. The U.S. is vetoing the appointment of new judges in the WTO’s appellate court, in what the French minister and the European Commission say is an attempt to undermine the institution.

Jean-Baptiste Lemoyne | Stephane de Sakutin/AFP via Getty Images

Lemoyne warned that France would push for the appellate court to continue its work despite Trump’s opposition.

“It is necessary to think about all the forms of Plan B, which make it possible to maintain … a mechanism for those states that are in favor of having it. Because there is still a very strong majority of WTO countries that wish to continue to have this type of dispute settlement.

“So I think that now we must actually start to be creative and therefore France will also … put proposals on the table to restore efficiency to the WTO both in its function as a developer of standards and in its function as a judge.”

French President Emmanuel Macron will discuss the trade tensions with Trump on his state visit to Washington next month, Lemoyne said.

In another sign that Europe is unwilling to roll over in the face of Trump’s threats, Lemoyne said that Paris would use the EU leaders’ summit on March 22-23 “to establish what we call a European chief enforcer, who would be charged with the power to activate all sorts of control mechanisms and retaliation measures.”

Such an enforcer, who would work in the European Commission’s trade department, “could also be a deterrent vis-à-vis certain partners who sometimes test the limits.”

Original Article

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