Top Trump adviser says UK slips behind EU in trade priorities

After months of promises that the U.K. would be next in line for trade negotiations with the Trump administration, U.S. officials are signaling the European Union might still be the easier target for a quick outcome aimed at avoiding a transatlantic tariff battle.

Trade talks with the EU and U.K. are on separate tracks but because of “some structure” on the EU side, “reigniting that will be easier” than starting from scratch with the U.K., White House economic adviser Larry Kudlow said in an interview.

Since a new European Commission took office late last year, officials on both sides have pointed to a reset in the U.S.-EU relationship and agree there’s a sense of urgency for a truce.

“No one around here is salivating for a trade war,” Kudlow said Feb. 6. “Believe me, no one.”

The newfound enthusiasm for an EU deal comes as the bromance between President Donald Trump and U.K. Prime Minister Boris Johnson took a serious hit when Johnson announced in late January that he’d allow Huawei Technologies Co. to supply part of the country’s 5G infrastructure. His decision to rebuff U.S. efforts to block the Chinese telecommunications company for national security reasons disappointed senior members of the Trump team.

According to people familiar with a subsequent call between the two leaders, Trump told Johnson that they both have to do what is necessary now, indicating that Johnson’s Huawei decision could have consequences for the special relationship.

Kudlow said the two countries are “in the preliminary stages of preliminary talks” for a trade deal. “We are all interested in doing something. But there’s no structure to it yet,” he added.

The U.S. and Europe, meanwhile, are aiming to build on a framework that former Commission President Jean-Claude Juncker hashed out with Trump in July 2018 and that served as the basis for transatlantic peace since then. Kudlow and Juncker’s chief of staff then played a crucial role in securing that agreement.

But things looked a little different a few weeks ago. Last month at the World Economic Forum in Davos, Switzerland, Trump and senior members of his Cabinet once again threatened to impose car tariffs if Europe doesn’t follow the U.S.’s playbook and timetable in the negotiations.

Now, Trump and EU Commission President Ursula Von der Leyen are trying to come up with an agreement to avoid any further duties, even as the exact content of their pact as well as the deadline are still uncertain. The White House has declined pitches from the business community to help outline what a positive transatlantic agreement could look like, a person familiar with the matter said.

Kudlow insists that a meeting between the leaders won’t happen “until we have meat on the bones” and there’s an announcement to make.

European Trade Commissioner Phil Hogan last week made his second trip to Washington in less than a month, in part because his first meeting with U.S. Trade Representative Robert Lighthizer was less productive and cordial than planned, people familiar the conversation said.

During their first encounter in January, the two men disagreed about their assessments of the Trump administration’s phase one deal with China, the people said.

But even if they can cobble together some outcomes and sell it as an early harvest—or phase one—agreement, longstanding sticking points remain that would likely make it hard to reach a comprehensive deal.

“We have to get some more concessions from Europe,” Lighthizer told Agriculture Secretary Sonny Perdue on a podcast last week. “The president’s absolutely right—there’s no reason for us to have a $10 billion or $12 billion deficit with a country with which we ought to have an enormous surplus. And they don’t mind sending cars and things to us but they won’t accept our agriculture, at least parts of it. We have to change that.”

Aside from agriculture, a number of other irritants have caused tit-for-tat tariff threats in recent months.

Among them: a dispute over aircraft subsidies as well as a French tax on digital services companies which the Trump administration says is discriminatory and aimed squarely at U.S. tech giants like Alphabet Inc.’s Google, Apple Inc., Amazon.com Inc. and Facebook Inc. The White House has threatened tariffs of as much as 100% on French goods and vowed to pursue the same measures for any other European country that implements such a tax.

But according to Kudlow, more tariffs and disruption are not the plan.

“We have a certain stability in the tariff and trade story right now and it’s very constructive and we’d like to keep it that way,” he said. “So we will just give it our best efforts.”