US President Donald Trump drew so much attention this past week on matters ranging from wanting to buy Greenland to a supporter’s weight problems, that it was easy to miss some of his more stinging remarks on trade.
While much of the focus was on his plans to divide up implementation of the next round of 10 per cent tariffs on Chinese imports between September 1 and December 15, and on the sharemarket plunge that followed, comments he made at a rally in New England signalled no backing down from his views about imbalances elsewhere.
It’s hardly the first time he’s gone there with the EU. But Eurostat numbers on Friday didn’t help the continent’s case with Trump, who sees a ledger with more exports than imports as winning. The EU’s trade surplus with the US stood at almost 75 billion euros ($123 billion) in the first half of 2019, up more than 11 per cent from a year earlier. Germany’s surplus is by far the largest in the bloc.
Tariff tensions between the US and China are catching much of the blame for recent turmoil in financial markets because it involves the world’s two largest economies. It’s hard to fathom the additional fallout if Europe gets engulfed next in Trump’s trade wars.
That Trump isn’t softening up his rhetoric on some of the biggest US allies in Europe is important for a couple of reasons – both coming up fast, and both fuel for more trade war uncertainty. Among them:
- UK Prime Minister Boris Johnson has said he’s committed to delivering Britain’s exit from the EU on October 31, without an agreement if necessary – a scenario economists say would harm the economy amid disruptions in, among other things, cross-border commerce.
- Trump is also in middle of a six-month delay in deciding whether to impose tariffs on car imports, which would mean that decision could come in mid-November. Doing so would almost certainly spark retaliation from Brussels and be likely to push Germany’s near-stalled economy closer to a recession.
All this makes for an interesting gathering at the Group of Seven leaders’ summit next weekend. The venue: the seaside town of Biarritz, France. The G7 summit in Canada last year ended amid trade fights, with White House trade adviser Peter Navarro famously concluding that there’s a “special place in hell” for Canadian Prime Minister Justin Trudeau – comments Navarro later apologised for.
Before the Biarritz gathering, though, the US Trade Representative’s office is holding a hearing on Monday on France’s contentious digital tax, which targets 3 per cent of large tech companies’ revenue from digital activities. The tax, which applies retroactively to January 1, targets companies like Facebook, Amazon.com, and Alphabet ‘s Google. It is likely to hit about 30 companies overall.
Trump, while often at odds with Big Tech, disapproves of France’s move. “If anyone taxes them, it should be their home country,” he tweeted in July.
The first payment is due in November.