President Donald Trump renewed his threat to put hefty tariffs on European cars Tuesday at the World Economic Forum, promising hardball tactics if trade negotiations did not go his way.
Just days after Trump scored big wins with China, Mexico, and Canada, the move highlights how Trump is quickly pivoting to make Europe the next front in his protectionist trade war.
As part of this push on Tuesday, Treasury Secretary Steven Mnuchin warned that Italy and Britain could face U.S. tariffs if they pursue taxes on large digital companies like Facebook and Alphabet’s Google. French President Emmanuel Macron agreed in recent days to delay a similar tax in order to avoid Trump’s tariffs.
The threatened tariffs symbolize the growing rift between the United States and Europe, which was on clear display as leaders from the two continents appeared to be talking from different scripts. Trump insisted on discussing a new trade deal, while European leaders kept emphasizing action on climate change and cooperation.
“We’re going to talk about a big trade deal,” said Trump, at the start of a one-on-one meeting with the European Commission President Ursula von der Leyen. “We’ve been talking about it for a while, and hopefully we can get something done.”
After 70 years of being largely hand-in-hand in promoting democracy and capitalism around the world, the United States and Europe are now at odds over trade, climate change, taxation, privacy, Iran, and defense funding. And Trump continues to try and use tariffs to pressure European leaders to meet his demands.
“Europe and America are moving slightly apart from each other. It’s not just the trade war, but a fundamentally different approach to privacy and the role of business and society,” said Rachel Kyte, dean of the Fletcher School at Tufts University and the former World Bank special envoy for climate change.
Leaning on the same tactics he used against China, Trump threatened a 25% tax on European cars if Germany, France and the United Kingdom did not formally announce that Iran had broken a 2015 nuclear deal. The long-time U.S. allies ultimately did just that, last week.
The U.S. president used the same threat to get France to back down on its proposed digital tax. Trump said he would impose tariffs “up to 100%” on roughly $2.4 billion worth of imported French wine and other goods unless France stopped its plans to put a 3% tax on large technology companies like Google and Facebook with global revenue topping €750 million euros. Most of the companies subject to that tax are American.
“If anybody is going to tax these companies, it’s going to be U.S.,” Trump said Tuesday shortly after confirming that Macron had agreed to delay the digital tax this year in exchange for Trump holding off on the tariffs.
In Europe, world financial leaders expressed hope that Trump had come to Davos to announce a reduction in trade tensions not just with China, but with Europe as well. Macron tweeted Tuesday morning that he and Trump had a “great discussion” where they agreed to work together “to avoid tariff escalation.”
But Trump made it clear that his new focus is a wide-ranging trade deal with Europe, and that he had not taken tariffs entirely off the table.
“They know that I’m going to put tariffs on them if they don’t make a deal that’s a fair deal,” Trump told The Wall Street Journal shortly before he had his first meeting with the new European Commission president.
Many business and political leaders in Europe are unsure if this is just a result of Trump’s “America First” rhetoric or if there is truly a deeper divide developing.
“It’s difficult to say if this is a new norm or just a political period,” said André Calantzopoulos, a Greek businessman who is chief executive of Philip Morris International.
Trump in 2018 also promised to slap tariffs on European imports, but European officials agreed to enter trade talks. Those talks have moved very slowly though, in part because of disagreements about agriculture and because the White House has focused on China.
While there is widespread hope among the elite gathered in Davos that the United States and Europe will keep a close relationship, business leaders say they are increasingly having to develop different strategies for the two regions, something that would have been unthinkable only a few years ago.
“It’s almost as though there are three different models: there’s the Asia model, the Europe model and the Americas model,” said Kelly Grier, U.S. chair of Ernst & Young, a global consulting firm. “That is without a doubt adding complexity to business in general.”
Grier pointed to diverging regulations around data privacy in Europe, China, the United States and now California as an example of a costly and cumbersome legal environment that business now have to navigate.
For months, European officials have tried to stay under Trump’s radar, hoping that he was distracted with the China talks. Several European leaders, including Macron, have invited Trump to high-profile ceremonies, in part to keep trade discussions going and avoid tariffs.
“Up until now, Europe has managed to keep its head low when it comes to Trump’s trade ire,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “But with Trump calling a truce with China, he may be looking to pick one last trade fight before the November election – and Europe is in his sights.”
Still, among many European business leaders in Davos, there is disbelief that Trump would actually go forward with extensive tariffs on Europe.
“Often the bark seems to be worse than the bite,” said Mark Haefele, chief investment officer at UBS bank. “President Trump, as he gets closer to the election, may have an ‘America First’ policy in name, but he’s very focused on the overall economic success of the United States.”
They point out that the United States and Europe have a lot more in common than the United States and China. Wages in much of western Europe are the same, or even higher, than they are in the United States, making the economies more of an even playing field.
Still, the Trump administration warnings on new EU tariffs are following a familiar pattern. Much to European leaders’ chagrin, Trump has backed out of the Iran nuclear deal and the Paris climate accord, as a key part of his “America First” strategy. In Davos, Trump did not even mention climate change, the key issue at the top of most European leaders’ agendas.
“The world is in a state of emergency and the window to act is closing fast,” said Klaus Schwab, founder of the World Economic Forum, in remarks shortly before Trump took the stage. The European Union has its own Green New Deal in the works to become carbon neutral by 2050 that includes new regulations and massive government investment.
In his formal address at Davos, Trump dismissed climate change concerns as overly alarmist. He stressed countries should be free to make their own decisions.
“We must reject the perennial prophets of doom and their predictions of the apocalypse,” Trump said. “These alarmists always demand the same thing: absolute power to dominate, transform, and control every aspect of our lives.”
The divergence in U.S. and European priorities was evident again when Trump met one-on-one for the first time with new European Commission President Ursula von der Leven.
Von der Leven told Trump of the long history of good relations between the two continents. She said there were “issues” to discuss but never used the word “trade.”
“I think what we never should forget that we have a long history of a common foundation the American people and the European people are good friends, and this is what we’re going to build on,” she said.
Even while nerves are high about what Trump will do in this next phase of his trade war, there was relief that Trump at least came to Europe and was willing to talk. In addition to his speech, he met and dined with several European officials and business leaders.
“We are all here. Everybody is here,” said Kristalina Georgieva, the new head of the International Monetary Fund who grew up in Bulgaria during the Cold War. “We may be shouting with each other, but we are talking with each other.”
(c) 2020, The Washington Post · Heather Long
{Matzav.com}
