There is one thing to be said for President Donald Trump’s trade policy: it rarely allows a dull moment. On Wednesday, Wilbur Ross, the US commerce secretary, went to Brussels and accused the EU in no uncertain terms of dragging its feet in negotiations. Thus he imperilled an uneasy peace that had held since July, when European Commission president Jean-Claude Juncker and Mr Trump announced talks on a bilateral deal to head off the threat of the US imposing tariffs on cars from Europe.
There is one thing to be said for President Donald Trump’s trade policy: it rarely allows a dull moment. On Wednesday, Wilbur Ross, the US commerce secretary, went to Brussels and accused the EU in no uncertain terms of dragging its feet in negotiations. Thus he imperilled an uneasy peace that had held since July, when European Commission president Jean-Claude Juncker and Mr Trump announced talks on a bilateral deal to head off the threat of the US imposing tariffs on cars from Europe.
The importance of this week’s intervention should be treated with some scepticism. Mr Ross is towards the aggressive end of the wide spectrum of opinion on trade in Mr Trump’s administration. The actual talks are being run by Robert Lighthizer, US trade representative. Still, it is not clear whether the current piecemeal approach to the negotiations can last.
The Juncker-Trump agreement was to work towards a bilateral deal reducing to zero all tariffs on industrial goods excluding cars, plus some symbolic talk about Europe buying more soyabeans and liquefied natural gas. But there is widespread disquiet about this among EU member states, the European Parliament and even parts of the commission. Many regard it as appeasement. It requires the EU to break its own rules that require it to sign only deals that cover nearly all trade, and only with governments that — unlike the US — are committed to the Paris agreement on climate change.
Mr Lighthizer and Cecilia Malmstrom, the EU trade commissioner, have signalled that they are planning on announcing some minor regulatory co-operation as a downpayment on more substantive agreement. This has the advantage of not requiring European parliamentary or US congressional approval. But it may not keep a president as mercurial as Mr Trump happy for long. The EU must be prepared for a renewal of tariff hostilities at any moment.
The same is true in the conflict between the US and China, where no ceasefire is in place. Indeed, the current battle over trade policy could easily spread to another front, in the form of exchange rates. This week the US Treasury, as it has since 1994, declined formally to name China as a currency manipulator in its twice-yearly report on the subject. The Trump administration, like previous ones, has inveighed against what it says is an undervalued renminbi without ever officially making the designation.
The act of naming China would in itself have no repercussions beyond requiring the US administration to open negotiations with Beijing. But it would be a highly symbolic moment. If the renminbi continues to weaken, Mr Trump may go on the warpath again. The US suspects Beijing will allow a depreciation as a form of retaliation against American tariffs.
Given the potential to spark a full-on episode of capital flight such as that which shook global markets in 2015, China would be foolhardy to try such a manoeuvre. But that does not guarantee it will escape blame for a weaker currency from Washington. Trying to make sense of Mr Trump’s trade policy, still less engage meaningfully in negotiations, is a near-impossible task, not least because of its internal divisions and contradictions. Both the intemperate and the level-headed elements inside the international economics team in the Trump administration were on display this week. America’s trading partners need to be aware that either could suddenly prove triumphant. They should be prepared to react accordingly.
