Trade tensions poised to rise as EU-US talks break down

European Union efforts to soothe transatlantic trade tensions have stalled, according to the bloc’s trade chief, who said the upcoming U.S. election means any breakthrough may be delayed until after November.

Washington has “stepped back” in recent weeks from talks aimed at defusing a longstanding dispute over aircraft subsidies, Phil Hogan told a video conference of EU trade ministers on Tuesday. Failure to reach an accord could pave the way for Europe to impose tariffs on billions of dollars of American goods as soon as July.

“We must acknowledge that the U.S. is now in a pre-election phase,” Hogan said. “Political attention in Washington is therefore much more on the immediate challenges in U.S. domestic politics.”

The EU wants to renew a July 2018 truce that began to fray late last year when the U.S. targeted Europe with new tariffs or warnings of them. Chief among Europe’s worries is a lingering U.S. threat to hit EU cars and auto parts with duties based on national-security grounds.

Car Tariffs

U.S. President Donald Trump revived that possibility on June 5 during comments in Maine, where he demanded the EU “drop” its 8% tariff on imports of American lobster “immediately.” Trump was speaking to fishing-industry representatives who complained about European market barriers.

“The European Union has ripped this country off so much, it’s unbelievable, and it’s so easy to solve,” Trump said. “If they don’t change, we’re going to put a tariff on their cars until they change. And they’ll change right away.”

Hogan told the EU trade ministers on Tuesday to expect more such rhetoric as a European push for a deal with the U.S. to cut industrial tariffs across the board stalls. Meanwhile, the spotlight in transatlantic trade relations is likely to turn back to the nearly two-decade-old dispute over aircraft subsidies.

Last year, the U.S. was given the green light by the World Trade Organization to impose impose tariffs on $7.5 billion of European goods in retaliation over illegal government aid to Airbus SE. Hogan said he expects the WTO to rule “around” early July on a parallel EU case against American aid to Boeing Co.

“I regret that the U.S. has stepped back from the settlement talks in recent weeks,” he said. “Positions are therefore still quite far apart. If this remains the case, the EU will have little choice but to exercise its retaliation rights and impose our own sanctions in the Boeing case, once we have the WTO award.”

WTO Chief

On a separate WTO matter, Hogan said on Tuesday he was weighing the possibility of becoming an EU candidate in the race to lead the global trade arbiter.

The EU trade ministers discussed the WTO process for selecting a successor to Director-General Roberto Azevedo, a Brazilian national who will step down a year early at the end of August. The WTO is accepting nominations between June 8 and July 8.

“Certainly I am exploring the option of being a candidate for the director-general of the WTO,” Hogan told reporters after the video conference. “There is an important amount of work to be done to reform the organization.”

Europe is keen on strengthening the WTO amid growing U.S.-China tensions, which threaten to undermine the global commercial order established after World War II.

A European candidate for the WTO leadership would enter a field that already includes official or presumptive nominees from countries ranging from Mexico to Nigeria. The last European in the job was Azevedo’s predecessor, Pascal Lamy, a Frenchman who held the post between 2005 and 2013.