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.
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.
"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.
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."
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.
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.