The Trade Dogfight Trump Can Say He Won Fair and Square

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If President Donald Trump imposes new tariffs on European goods next month, America’s transatlantic allies can’t say they they’ve been blindsided like they have with other trade policies launched from his White House.

While some may bristle that the self-proclaimed “Tariff Man” is expanding his trade fight with the European Union, Trump would be acting on the right side of international law in a long-running case pitting Toulouse, France-based Airbus and Chicago-based Boeing. This time he’ll have the explicit authorization of the World Trade Organization, the referee of global commerce.

That’s a key distinction from Trump’s tariffs on Chinese goods, or steel and aluminum imports, or the threat of tariffs on foreign cars and parts — instances when he acts based on his presidential authority. It’s also a break from the norm for a leader who has trashed the WTO as the “single worst trade deal ever made” and threatened to withdraw from the organization entirely.

Here’s how the international trading system is supposed to work:

If a country gets upset with another country’s trade practices, it can file a dispute at the WTO where a panel of experts offers a judgment. If the losing country doesn’t comply with that ruling, the WTO allows the winning country to retaliate. For most of his first term in office Trump has preferred to cut to the chase and levy tariffs that he says are exempt from WTO oversight because they’re necessary to protect America’s “public morals” and national security. But in the instance of Airbus, Trump and his predecessors have pursued and succeeded in a landmark case against the EU that’s been a decade-and-a-half in the making. Last year the WTO ruled that the EU hasn’t ended its illegal subsidies, which Boeing and the U.S. claim give Airbus an unfair advantage, and the WTO will soon green-light new U.S. tariffs on billions of dollars worth of European goods.

But the other shoe has yet to drop. In a similar action that’s still winding through the Geneva-based WTO, the European Commission is readying its own tariffs on U.S. exports in retaliation for unfair subsidies given to Boeing. EU Trade Commissioner Cecilia Malmstrom summed up the situation on Monday by saying “both we and the U.S. have sinned” and the time has come to settle the dispute rather than resort to tit-for-tat tariffs.

The multi-billion dollar question now: Will Trump see an opportunity to forge a comprehensive aerospace accord with the EU or kick off a transatlantic trade war of epic proportions instead?

Charting the Trade War

Global trade in services slowed during the first quarter of 2019, according to a new World Trade Organization report, which describes a “broad loss in momentum” among sectors like technology and tourism.

Today’s Must Reads

U.S.-Japan deal | Washington has plans to sign a trade accord with Japan in coming weeks, though Tokyo warned any deal must include pledges of no new tariffs auto exports. Plow ahead | Chinese trade officials are coming to the U.S. this week to prepare the agenda for a meeting of top negotiators in October, the Ministry of Commerce said. Chip shot | The U.S. government will need to agree to talks with Huawei as part of a future trade deal with China, a top executive at China’s largest tech company said. Landmark hearing | Boris Johnson’s Brexit strategy has been on trial since he became Britain’s prime minister, and on Tuesday his lawyers will defend it in the U.K.’s highest court. Swiss miss | Switzerland’s economy is expected to expand less quickly than the government previously project, slowed by weaker demand from the world’s major economies.

Economic Analysis

Spending less | Economic slowdowns, trade wars and the U.S. Huawei ban threaten tech spending. Further easing | The PBOC stepping up stimulus to buffer the Chinese economy from trade war.

Coming Up

Sept. 18: Japan, Italy trade balance Sept. 19-20: U.S.-China talks in Washington

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–With assistance from Brendan Murray and Viktoria Dendrinou.

To contact the author of this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editor responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net, Richard Bravo

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