01:04 GMT +320 October 2019
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    France Rejects Trade Negotiations With US While Metals Tariffs In Place

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    French Finance Minister Bruno Le Maire says his country won't engage in free trade talks with the US "with a gun to its head," urging the Trump administration to revoke its tariffs on the imports of European steel and aluminum.

    Kristian Rouz — The prospect of a sweeping trans-Atlantic trade deal is becoming increasingly bleak as European officials voice their growing dissatisfaction with US trade policies. French Finance Minister Bruno Le Maire has categorically rejected the idea of trade talks with the US for as long as Washington keeps its Section 232 tariffs on industrial metals in place.

    Le Maire said his country is opposed to opening free trade talks in light of the existing restrictions on bilateral trade. He urged the US to rescind its duties on European steel and aluminum first as the main pre-condition for such talks to commence.

    "World trade cannot base itself on the law of the jungle and the unilateral increase of tariffs is the law of the jungle," Le Maire said at the G20 summit in Argentina.

    Despite admitting global trade wars are a "reality," the French Finance Minister failed to acknowledge America's rationale behind the Section 232 tariffs. The discrepancies between the elevated EU imports tariffs and the ultra-low tariffs in the US had prompted the Trump administration to conduct its investigation into the overcapacity of steel and aluminum overseas.

    But France appears to be willing to play the diplomatic game of attrition against the US after the EU concluded a lucrative free trade deal with Japan, whilst mainland China is aggressively seeking a similar accord with Europe.

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    "The law of the jungle will only turn out losers, it will weaken growth, threaten the most fragile countries and have disastrous political consequences," Le Maire said.

    His American counterpart, Treasury Secretary Steven Mnuchin, responded by reiterating President Donald Trump' stance on trade — any possible future agreement must ensure the gradual elimination of the existing imbalances in trade relations between the US and its overseas partners.

    Such imbalances include massive US deficits stemming from varying currency regimes and tariff policies across the globe. Over the past three decades, the US had adhered to the principles of open trade — or laissez-faire — resulting in significant damages to the American economy, as Trump administration officials see it.

    "My message is pretty clear, it's the same message the president delivered at the G7," Secretary Mnuchin said. "If Europe believes in free trade, we're ready to sign a free trade agreement with no tariffs, no non-tariff barriers, and no subsidies. It has to be all three."

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    Secretary Mnuchin's remarks reflect the Trump administration's objective of striking mutually-favorable bilateral trade deals with US allies first, and, subsequently, any other interested nation as well. The blueprint for this trade diplomacy was set earlier this year when the US successfully negotiated updated terms for the KORUS trade deal with South Korea.

    But in order to motivate its allies to enter the negotiations similar to the previous discussions of KORUS, the Trump administration appears to be adamant to maintain its tariff pressure on foreign economies — as the lion's share of their exports go to the US.

    And French officials find such a stance quite irritating.

    "We refuse to negotiate with a gun to our head," Le Maire stressed.

    The EU's irritation also stems from Brussels' realization there is little they can do to make the US change its mind. Europe's industrial strength is quite fragile as the majority of European industries are essentially export-oriented, whilst domestic EU consumption has been subdued during the post-crisis recovery of the past decade.

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    Meanwhile, the US is ramping up the pressure, as the White House isn't expecting major downside effects of its own tariffs on the US economy. America is currently in the process of transition from the debt-fuelled service-based slow-growth model of past administrations towards an energy and manufacturing powerhouse.

    This transition is exemplified by the upbeat growth figures from such unlikely places as North Dakota, Louisiana, West Texas, and a handful of states forming the Rust Belt — which is gradually shedding the layers of rust off its manufacturing gears.

    "I still think from a macro basis we do not see any impact on what's very positive growth," Secretary Mnuchin said.

    The negotiations are poised to continue as multilateral trade wars unravel. Some experts and market participants have warned of the rising degree of unpredictability and the falling volumes in international trade — both being the indicators of the accelerating realignment in global supply chains.


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    US import tariffs, trade war, trade deal, European Union, Bruno Le Maire, France, United States
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