US-EU tariffs

By Andrew Hammond

The European Council formally decided, April 15, to reopen trade talks with the United States to try to reach a new transatlantic deal.

Yet the process may be doomed from the start with Brussels having also drawn up, separately, a list of U.S. imports worth around $22.6 billion that it could hit with tariffs over a transatlantic aircraft subsidy dispute.

The EU moves follow Donald Trump's threat to impose tariffs on EU goods worth $11.2 billion. This would significantly escalate economic and political tensions between the world's biggest trading blocs and underlines the hollowness of the supposed framework trade accord agreed last July between Trump and outgoing European Commission President Jean-Claude Juncker.

The transatlantic tension comes at an increasingly difficult moment for world trade, which is slowing partly because of concerns over Trump's protectionist policies. Washington has already placed tariffs of 10 percent on $200 billion of Chinese imports in a dispute with Beijing, although the two sides could yet agree a new dealthis spring.

On the EU front, Trump's U.S. trade representative Robert Lighthizer announced last week a list of goods which could be hit by tariffs in retaliation for EU subsidies to Airbus, the European aerospace manufacturer. This 14-page list includes French cheese, wine, champagne, olive oil and seafood such as oysters, plus aircraft.

The latest spike in tensions emanates from a long-running dispute between Airbus and Boeing, the two major civil aerospace operators. These two have been at the center of a tit-for-tat battle over subsidies by their respective governments.

While the proposed U.S. tariffs are very small as a percentage of the overall U.S.-Europe trade, they are probably a U.S. negotiating tool to set the tone for wider, important negotiations to come, including in the autos sector. What this underlines is the fragility of the framework trade "accord" agreed by Trump and Juncker last summer.

Welcome as the immediate de-escalation of tensions was then, question marks hung over the framework accord from day one and it was an open question whether the ambitions would be realized, despite Trump's claims that the agreement was a "great day for free and fair trade."

Part of the reason that many suspected the new accord could fall down is the mercurial nature of the U.S. president whose diplomatic disdain for the EU goes significantly beyond that of any his predecessors in the White House.

Indeed, following the Trump's latest gambit, U.S.-EU tensions could easily surface again given that the Brussels-based club appears a deep source of frustration for the president. Last summer, shortly before Juncker's visit, he remarkably declared "I think the EU is a foe, what they do to us [the United States] in trade."

While some have dismissed this remark as just another spur-of-the-moment presidential outburst, Anthony Gardner ― who served as U.S. ambassador to the EU under Barack Obama ― warned at the time that "Europe [needs to] wake-up: the U.S. wants to break-up the EU...Remember Belgium's motto L-Union fait la force (Unity creates strength)."

The contrast here between Trump, with his calls for more "Brexits" within the EU, and U.S. policy at the start of the European integration process could not be starker. Embodied in John Kennedy's 1962 Atlantic Partnership speech, the core U.S. view then was that a united Europe would make future wars in the continent less likely; create a stronger partner for the United States in meeting the challenges posed by the Soviet Union; and offer a more vibrant market for building transatlantic prosperity.

Yet, U.S. attitudes have gradually become more ambivalent as integration deepened, particularly in recent Republican administrations. In the economic arena, for instance, the drive toward the European Single Market led to U.S. concerns about whether this would evolve into a "Fortress Europe."

Prior to Trump, the George W. Bush administration came closest to questioning the value of European integration. For instance, the controversy over the Iraq conflict saw Washington querying the benefits of EU collaboration in the security and defense arena. On the eve of the NATO defense review in 2003, U.S. Defense Secretary Donald Rumsfeld even drew a distinction between "old" and "new Europe" with the latter perceived as more favorable to U.S. interests.

However, while the Bush team eventually recognized the need to draw back from this approach, it appears Trump may not be willing to do the same and has indeed raised the rhetoric several notches. In so doing, one of the features of the current president's approach last year was an incredible attempt to try to prize apart Germany and France, the traditional two motors of EU integration.

While the White House's gambit in trying to split Germany and France is most unlikely to succeed, it underlines how U.S. ambivalence about European integration has reached its apotheosis under Trump.

The U.S. president remains the first U.S. head of state in history who appears to want to not just weaken, but also splinter, the Brussels-based club, and last week's proposed tariffs could be the opening salvo in new transatlantic tensions.

Andrew Hammond (andrewkorea@outlook.com) is an associate at LSE IDEAS at the London School of Economics.