Donald Trump declared on Tuesday he was prepared to wait until after the US election next year to reach a trade deal with China, fuelling global economic tensions a day after stepping up a dispute with EU allies.
The US president said there was no deadline for the US-China talks, raising doubts about the prospects for a resolution to the dispute with Beijing.
“In some ways, I like the idea of waiting until after the election,” the US president told reporters on a visit to London for a summit of the Nato alliance. “The China trade deal is dependent on one thing: Do I want to make it? . . . We’re doing very well with China right now and we can do even better.”
Markets were shaken by the comments. The S&P was down more than 1 per cent in morning trading in New York, following a decline in the European Stoxx 600 index of 0.4 per cent and a drop of 1.6 per cent for the FTSE 100.
Mr Trump has previously said that he was willing to wait until after the 2020 election to ink a deal with China, most recently in September in a press conference with Scott Morrison, the Australian prime minister.
“I don’t think I need it before the election. I think people know that we’re doing a great job,” he said at the time. Mr Trump has also said at other times that China was urgently looking for a deal and willing to wait for the chance that a Democratic candidate wins the 2020 presidential race and replaces Mr Trump in the White House.
Mr Trump’s latest comments came after Washington on Monday threatened to impose 100 per cent tariffs on up to $2.4bn of French goods, including champagne and luxury items. The decision followed a conclusion by the US trade representative’s office that a French digital services tax unfairly discriminated against American technology companies.
Washington also said on Monday it might broaden its punitive tariffs on other EU products — including from the UK, France, Spain and Germany — because of subsidies to European aircraft maker Airbus that have been deemed illegal by the WTO.
In addition, the US said on Monday it would restore tariffs on metals from Argentina and Brazil to punish them for their currency policies.
Paris hit back at the Trump administration’s tariff threat, with France’s finance minister vowing the EU was ready to retaliate with “a strong riposte”.
Bruno Le Maire called the tariff plans “unacceptable” and not worthy of an ally. “It’s in no one’s interest, it’s not in the interest of growth, or of political stability,” he said in a radio interview on Tuesday.
The planned tariffs on French goods follow months of complaints in Washington about the digital services tax, introduced by the government of President Emmanuel Macron, which targets companies such as Google, Apple, Amazon and Facebook.
France insists that the tax, designed to ensure that tech companies pay a reasonable level of tax in the countries where they do business rather than shifting the profits to tax havens, is aimed at companies from all countries, including China. It was pitched as a stop-gap measure until new rules could be approved on a multilateral basis through the OECD.
Mr Le Maire asked whether the US was still committed to reaching an agreement at the OECD for a global minimum tax.
The OECD negotiations are underway and due to be concluded next year. Mr Le Maire had announced at the G7 summit in Biarritz in August that the US and France had reached a compromise on how to treat France’s national turnover tax on big tech groups.
According to Mr Le Maire, he and US Treasury Secretary Steven Mnuchin agreed that the French tax would stay in place for two years but companies would receive tax credits for those years if the international tax rate agreed at the OECD resulted in a lower level of taxation.
Agnès Pannier-Runacher, French junior finance minister, said France would not back down on its digital tax and needed to be “pugnacious” in defending it.
Sparkling wines had been left off the list of tariffs imposed in the tussle over subsidies to Airbus but are a target in the digital tax dispute with France, along with handbags, porcelain, cheeses, yoghurt and other French products. As well as threatening levies on the new categories of imports, the US administration said it would consider whether to impose “fees or restrictions” on French services.
The US also warned that other countries that have introduced digital services taxes, including Italy, Austria and Turkey, could face similar action.
A spokesman for the European Commission said that it would “seek immediate discussions” with the US over its threat, noting that Washington had not yet decided on a final course of action.
The spokesman said that Brussels wanted to “solve this issue amicably to prevent a dispute at the WTO”, noting that the EU backed international efforts to design a common approach for taxing the digital economy.
“We are working hard with our international partners to achieve that and are encouraged by the progress being made at the Organisation for Economic Co-operation and Development,” he said.
Brussels also reiterated the EU’s desire to reach a settlement with Washington that would end the two sides’ escalating dispute over subsidies to Airbus and Boeing but said that the Trump administration had shown no interest in talks.
It said that a WTO panel ruling against the EU earlier this week did not give the US legal grounds to ratchet up punitive tariffs on European products.
“Should the US choose to go ahead with the process to increase the tariff rates or subject additional EU products to the tariffs, such escalation would not facilitate reaching a settlement,” the commission spokesman said.
The commission is considering appealing against the panel’s finding that the EU failed to comply with previous rulings on illegal Airbus subsidies. Brussels believes that the panel made “a number of serious legal errors in its assessment,” said the spokesman.
