President Donald Trump’s decision this week to shield the European Union from steel and aluminum tariffs for another 30 days is a sign of the economic bloc’s importance as Washington enters thorny trade talks with Beijing, analysts say.
The White House late Monday announced Trump was extending the exemptions from punishing metals tariffs for Canada, Mexico and the EU.
The EU expressed disappointment, saying the decision would ‘prolong uncertainty,’ and called for a permanent exemption.
But the move came the day before an American delegation was due to go to China to try to head off a trade war over Beijing’s violation of intellectual property rights.
Monica de Bolle, senior fellow at the Peterson Institute for International Economics, said Trump could not go it alone in confronting the country’s policies on technology ‘and the EU knows that.’
Washington has accused China of the ‘theft’ of American technology, such as forced technology transfer and Trump announced $50 billion tariffs on Chinese goods in retaliation to try to pressure them to make changes.
Trump has said unfair trade practices drove the US goods deficit with the giant Asian economy to a record $375 billion last year.
China also was hit with the US tariffs of 25 percent on steel and 10 percent on aluminum but it exports comparatively little of the metals to the US market.
Treasury Secretary Steven Mnuchin will be accompanied by Commerce Secretary Wilbur Ross, US Trade Representative Robert Lighthizer and White House economic advisors Larry Kudlow and Peter Navarro for the talks Thursday and Friday.
Pressuring Beijing
‘The importance of the EU for the US goes well beyond trade or anything related to steel or aluminum,’ said de Bolle, adding that Brussels had undeniable strategic and diplomatic weight that Washington could not ignore.
The EU also objects against China’s policies on intellectual property, but would be unlikely to back the US in its fight if it had its own trade dispute underway.
Edward Alden, a trade expert at the Council on Foreign Relations, said Washington was hoping not to upset the apple cart in Brussels just as its heavy-hitters landed in Beijing.
‘While the big US team going to China, the Trump administration simply does not want to open up another front with the Europeans and decided to wait,’ he said.
Had the metals tariffs gone into effect for Europe on Tuesday, he said, swift European retaliation ‘would have left US quite isolated in dealing with China.’
With major European governments demanding permanent exemptions on Tuesday, Ross said the extended exemption was justified.
‘We’re having some potentially fruitful discussions about an overall reduction in trade tensions between the EU and ourselves,’ he told CNBC.
‘We’re hopeful that something good will come out of it.’
But Eswar Prasad, professor of trade policy at Cornell University, said by extending the exemptions only a short time, Trump expected to maintain pressure on Brussels.
‘The administration seems to be counting on a quick capitulation by the EU to its demands, despite the EU signaling quite clearly that it is not willing to negotiate under the threat of trade sanctions,’ he said.
And as Washington strikes bargains with Brazil, Australia, Argentina and South Korea, Washington is likely betting this will make it harder for the EU to stick to its guns, Alden said.