By Josh Zumbrun, Tom Fairless and Ian Talley
German Chancellor Angela Merkel and French President Emmanuel
Macron visit Washington this week with strains hanging over
European economic relations with the U.S.
The strains -- over trade, sanctions and other matters -- were
evident during semiannual meetings of the International Monetary
Fund and World Bank this in Washington this weekend.
European capitals find themselves facing blowback from U.S.
confrontations with China, Russia and Iran, including the threat of
steel and aluminum tariffs, the prospect of the U.S. pulling out of
the nuclear deal with Iran that the U.K., France and Germany helped
negotiate; and proposed sanctions on Russia. Other tensions loom
with the U.S., including Europe's plan to tax digital
companies.
Ms. Merkel and Mr. Macron visit Washington as a number of
deadlines loom, including May 12, Mr. Trump's self-imposed date for
essentially getting out of the Iran deal, and May 1, for steel and
aluminum tariffs taking effect in Europe.
"We are allies," French Finance Minister Bruno Le Maire said
Friday in a news conference. "We can't live with a Sword of
Damocles hanging over our heads."
He indicated that until the U.S. removes the threat of tariffs
on European steel and aluminum, the bloc wouldn't join in
Washington's campaign to pressure Beijing.
"If we want to discuss China we must first get rid of that
threat," Mr. Le Maire said. "This can't just be bilateral
work."
At a press conference Saturday, Treasury Secretary Steven
Mnuchin was asked if the U.S. had been successful recruiting or
persuading allies to its international efforts against China.
"We're not looking to recruit other people," he said. "What we
are looking to do is have discussions with our other partners, they
share similar issues, a lot of these issues are not unique to the
United States."
Mario Centeno, the Portuguese finance minister, who presides
over meetings of Eurozone finance ministers said, in reference to
trade, that "Europe is of course not happy with this dimension of
the global debate, we made it very clear to the U.S."
Many European policy makers have sympathy for U.S. frustration
with China's trade practices.
European Union financial-services chief Valdis Dombrovskis, said
the EU was eager to work with the U.S. "in a multilateral way" on
China's trade practices. He said that the EU was negotiating in
good faith on steel and aluminum tariffs, but would be prepared to
retaliate on trade if exemptions aren't granted.
"Of course, if for whatever reason they are imposed, we are
ready to react in proportional way which is in line with WTO
rules," Mr. Dombrovskis said. He added that the Trump
administration's justification for imposing the tariffs -- on
national security grounds -- didn't make sense. "We certainly do
not see the EU as a threat of national security for the U.S."
U.S. trade partners are accelerating trade deals with others to
protect themselves. The EU announced Saturday it had struck a
free-trade deal with Mexico, whose trade agreement with the U.S. is
being renegotiated after being attacked by President Donald Trump.
The EU said the deal would eliminate almost all tariffs on goods
bought and sold between the two regions, including in the
agricultural sector.
The EU-Mexico deal follows a December free trade agreement
between the EU and Japan that the European Commission touted as "a
powerful signal to the rest of the world that two large economies
are resisting protectionism."
"The list of partners willing to work with the EU in defending
open, fair and rules -based trade is growing fast," European
Commission president Jean-Claude Juncker said in a statement.
The United Kingdom shares concern with the U.S. about China, but
has found itself worrying it could suffer collateral damage in the
spat between the world's two largest economies.
"We do not believe that the implementation of tariffs is the way
ultimately to resolve problems in the global trading system," said
Philip Hammond, the U.K.'s Chancellor of the Exchequer. "We do
expect to suffer perhaps as much as many, and more than some, if
global trade were affected by such actions."
In challenging Russia and Iran, the Trump administration is
ramping up sanctions as a primary policy tool to challenge threats
to national security without military confrontation.
Europe is feeling the blowback. The European Union is Russia's
biggest trading partner, while Russia is the E.U.'s fourth largest
trading partner.
European finance ministers urged the U.S. Treasury against a
major escalation in sanctions against Russia and asked Mr. Mnuchin
to exempt their firms from the latest round of sanctions. Ms.
Merkel may press Mr. Trump to exclude existing contracts from
Russian sanctions, Austrian finance minister Hartwig Loeger said
Sunday.
German firms said complying with U.S. sanctions could cost them
hundreds of millions of dollars in lost contracts and raise
production costs.
Similarly, European nations are worried about the U.S. pulling
out of the 2015 Iran nuclear deal, which could involve Washington
imposing sanctions back onto broad swaths of the Iranian economy,
including oil exports and financing.
Many European nations, including Germany, Italy and Spain, have
business ties to Iran in the energy and industrial sectors. Oil
prices could also go back up, hitting Europe as its economy is
gathering pace.
"The message we are emphasizing is that it's important to
coordinate our response to Russia," said Mr. Dombrovskis of the EU.
Coordinating punitive actions against Russia and Iran is especially
important, he said, because of the negative economic impacts on the
European economy.
Other European officials put in it more bluntly in private
meetings with U.S. officials and finance executives this week. "We
still want to keep trans-Atlantic unity, but it is increasingly
difficult to do that," one European diplomat said.
Collectively, all of the policies putting Europe at odds with
the U.S. are going to drive political pressure within Europe in a
direction that many don't want, said the diplomat. "All mixed
together, this is not a good recipe."
--Stephen Fidler contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com, Tom Fairless at
tom.fairless@wsj.com and Ian Talley at ian.talley@wsj.com
(END) Dow Jones Newswires
April 22, 2018 15:15 ET (19:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.