Trump's trade war proves immune to the coronavirus crisis

Despite the coronavirus pandemic, unprecedented lockdowns and fears of a global economic meltdown, U.S. President Donald Trump is still waging his tariff-hiking trade war.

Just one day after G7 leaders - including Trump - said they remained "committed to the stability of the global economy" and pledged to "coordinate measures and do whatever it takes" to safeguard economic growth, Washington confirmed it was pressing ahead with tariff hikes on European aircraft to 15 percent, up from 10 percent, starting Wednesday.

Airlines have been some of the first and hardest-hit casualties of the crisis, and their crack-up is sending shockwaves through their suppliers. America's Boeing has called for a $60 billion bailout of the aerospace sector.

European leaders such as Commission President Ursula von der Leyen and her trade chief Phil Hogan had hoped that they would be able to steer Trump away from the trade war with a mini-deal in sectors such as technology, energy and food regulation. But that diplomacy fell flat, as Washington plowed on with efforts to shake up the dynamics of global trade, partly in the hope that its tactics will bring manufacturing jobs back to the U.S.

The United States carried through with its tariff hike on Wednesday. According to the U.S. Federal Register, the tariff hike took effect "with respect to products that are entered for consumption ... on or after 12:01 a.m. eastern standard time on March 18, 2020."

"Faced with a global pandemic and global recession ... one would think that any rational [person] would seek to stabilize trade and reassure markets" - Senior EU official

The Commission replied on Wednesday that its "strong view is that the focus of both sides should be on finding a negotiated solution to the aircraft disputes."

"Hogan made this point strongly to Ambassador [Robert] Lighthizer when they spoke on March 16," a spokesperson said, adding that the "Commission negotiating team will follow up actively with their U.S. counterparts in the coming days" to secure a truce.

The tariffs are unlikely to have any additional effect on Airbus in the short term, given that U.S. airlines have already delayed orders over the coronavirus travel bans.

A spokesperson for French Economy Minister Bruno Le Maire said Paris regretted the U.S. decision to hike tariffs: "We must do quite the opposite and coordinate our responses and support our economies."

Still, the tariff hike is yet another sign that Trump is not willing to put an end to his trade war, despite the enormous strain on the global economy and warnings from industry that government measures to contain the pandemic, such as travel bans, are already impacting global trade.

International organizations such as the OECD have warned of a global recession, and urged governments to cooperate to cushion the impact and calm markets.

Escalating crisis

Trump's decision to stick to his guns came as a blow to those who had hoped that the current crisis would cause a trade truce, if not an end to the war.

EU officials reacted with disbelief. "Faced with a global pandemic and global recession ... one would think that any rational [person] would seek to stabilize trade and reassure markets," said one senior EU official.

Christophe Hansen, a lawmaker in the European Parliament and trade coordinator for the European People's Party, warned that "fanning the flames of the trade war," was an "irresponsible and a dangerous distraction from the fight that really matters today."

While international cooperation was the "key" to a global recovery, Hansen warned that "this decision will only further undermine our already tense trade relations."

No tariff relief

The move was also a blow to many U.S. lawmakers who had also hoped for some trade respite.

Stephanie Murphy, a Florida Democrat, last month asked U.S. Trade Representative Robert Lighthizer to lower tariffs on the EU and China to calm markets.

"There is one lever currently entirely in the administration's [power] to provide a significant tax break to both businesses and consumers in America, and that's initiating a détente in the trade wars that were started with the Section 232 and Section 301 tariffs," Murphy said after a House Ways and Means Committee meeting with Lighthizer. Other U.S. lawmakers endorsed her proposal.

But White House trade adviser Peter Navarro last week slammed the idea, telling POLITICO "there are no discussions within the White House" about whether to suspend some tariffs, even temporarily.

"That is simply a fake news gambit by the usual Wall Street suspects who never met an American job they didn't want to offshore for the sake of a buck," Navarro said in an interview.

Decoupling

Instead, the White House appears set on using the coronavirus pandemic as an opportunity to accelerate the so-called decoupling from China.

Navarro - the foremost hawk in an administration of trade hawks - said Sunday that President Trump will sign an executive order this week that would help bring pharmaceutical and medical supply chains back to the U.S., in part by placing new "Buy American" requirements on certain government agencies.

White House economic adviser Larry Kudlow added Monday that the Trump administration is considering cutting taxes for companies that relocate their supply chains to the U.S., despite warnings that the measures would risk the supply of medicine and medical supplies at a time when they are needed most.

"We need greater cooperation, not keeping critical supplies in walled gardens" - Tony Fratto, former White House and Treasury Department official

Tony Fratto, a White House and Treasury Department official under the George W. Bush administration, called the move "a mistake."

"Pandemics are global," he wrote on Twitter. "We need greater cooperation, not keeping critical supplies in walled gardens."

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