WTO Chief warns US-China trade war could derail global economy

The head of the WTO warned about the first signs of an international trade war involving the US and China that could derail the global economy, as Europe kept alive a threat to join Beijing in pushing back against President Donald Trump.

“We are seeing the first movements toward” a commercial war, World Trade Organization Director General Roberto Azevedo said in an interview posted on the BBC’s website. “It would mean a severe impact on the global economy.”

Trump has imposed us import tariff rates on metal metal deriving from allies and adversaries alike and threatened levies on roughly $50 billion on Chinese goods, saying the moves are needed to protect national security. The US granted waivers on the steel and aluminium tariffs to a handful of partners including the European Union, Canada and Mexico, setting a May 1 deadline for a permanent solution. Avoiding an international trade conflict will require speedy negotiations on topics that can take years to hash out.

This has wrong-footed the EU, which is struggling to discern what Washington’s conditions are and even with whom in the Trump administration to negotiate, according to an official familiar with the bloc’s thinking.

Meanwhile, EU governments are rallying behind principles outlined by the European Commission, the 28-nation bloc’s trade negotiator. The commission says:

  • Trump’s May 1 deadline on tariff negotiations isn’t realistic
  • the EU must rule out making unilateral concessions and, while Trump’s trade goals are vague, the car industry seems to be at the centre of US concerns
  • the steel and aluminium debate should focus on the problem of overcapacity in China
  • the bloc must continue preparations to impose retaliatory tariffs on American goods and complain to the WTO should a permanent exemption prove elusive

In a sign of the confusion in European policy circles, the commission told EU ambassadors in a meeting on Wednesday in Brussels that the bloc must be ready to “think out of the box fast” in the talks with the US, according to the official, who asked not to be identified because discussions are ongoing.

So far, EU trade chief Cecilia Malmstrom is talking only to US Commerce Secretary Wilbur Ross, according to two officials. A big question mark is the degree to which the ultimate US position will depend on Trump himself, creating the possibility of near-permanent uncertainty and a possible US EU trade war, the second official said.

Commission President Jean-Claude Juncker last week dismissed the prospect of reaching an agreement with Washington by the deadline.

“It seems to me highly impossible to cover all the issues we have to discuss with our American partners from now to May 1,” Juncker said on March 23.