Opinion

Keep an eye on Trump’s other trade war

Angela merkel and Donald Trump

By Ferdinando Giugliano for Bloomberg Opinion

If you are looking for the thriller movie that has captured the attention of global markets, this is certainly the trade negotiation between the U.S. and China. It stars an unpredictable leader (President Donald Trump), an impenetrable rival (Chinese President Xi Jinping) and an issue which is typically secretive and hard to understand (trade talks).

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Equity and currency markets have moved at every whiff of glee or gloom coming out of the discussions. Yet there is another set of talks few are paying attention to, but which could prove just as important for the world economy.

The U.S. and the European Union are set to start their own discussions on industrial tariffs, and in theory these should pose few problems — the two blocs have close economic and geostrategic ties, rooted in a shared belief in democracy and the free market. Normally, the result would be a reduction in the levies and other barriers, something that would be most welcome. But in practice, the risk of a trade war is all too real.

The mood music isn’t great. President Donald Trump has called the EU “a foe” and decried its trade practices as “very unfair.” A July meeting with Jean-Claude Juncker, president of the EU Commission, went surprisingly well, but tensions have since resurfaced. Negotiations are meant to start soon, but France is dragging its feet also because of the U.S. decision to withdraw from the Paris climate accord.

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