Bruno Le Maire, France's finance minister, warned the US that China would emerge the winner from a full-blown trade war between Washington and Brussels, in the latest sign of rising transatlantic economic tensions.
Speaking to reporters at the annual meeting of the IMF, Le Maire urged Trump administration officials to enter negotiations to resolve a dispute over aircraft subsidies that led Washington to impose tariffs on US$7.5 billion ($11.7b) of EU goods this week.
France's finance minister also said a possible decision by the Trump administration to impose levies on automotive imports on national security grounds, as early as next month, would create a big political rift with the EU on top of the economic damage.
"We have to check who will be the winner of a trade war between the US and the EU that would have been triggered by the US administration. Clearly it will be China. Is it really what we want?", said Le Maire, ahead of a meeting with Robert Lighthizer, the US trade representative, on Friday.
Le Maire's admonition came as trade tensions dominated the discussions at the IMF meetings in Washington, with the Fund warning that they had contributed heavily to its downgrade of global growth forecasts this year to 3 per cent, the lowest level since the financial crisis.
While US and Chinese officials last week agreed to a tentative truce in their own trade war, there are scant signs of any lasting commercial peace deal between the world's two largest economies.
Meanwhile, US and EU relations are at a low point, after Washington's move to impose tariffs on goods ranging from French wine, to Italian cheese, Scotch whisky and Spanish olives, in connection with a WTO ruling on illegal state support to Airbus, the pan-European aircraft maker.
Even though the levies, which took effect on Friday, were compliant with WTO rules, Le Maire said they marked an "aggressive" step by the US administration. He accused Washington of keeping a "closed door" in terms of finding a negotiated settlement to the dispute.
The French finance minister also warned that the EU would be ready to retaliate once it gets the green light from the WTO to impose duties on American products next year in connection with a separate case on subsidies to Boeing.
"Besides the economic question there is a political question: we are facing an economic slowdown, we are facing a trade war between the US and China, we have considerable challenges to address," he said, referring to issues ranging from artificial intelligence to climate change.
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"Do you really think that opening a trade war between the US and the EU is the best political signal that we can send to the rest of the world?", he said.
US officials have said that EU pleas for a negotiation over Airbus subsidies have come too late. They add that the move to impose tariffs has only come after the legal dispute dragged on for years at the WTO.
However, they are open to talks. US-EU trade relations have not only been hampered by the aircraft case and the potential for car tariffs, but also by disputes over the taxation of digital companies and the EU's reluctance to consider further opening up of its market to US farm goods.
Olaf Scholz, Germany's finance minister, was more optimistic on the prospects of a deal on the aircraft subsidies in a joint press conference with Jens Weidmann, Bundesbank president. "I think it will work at the end of the day," he said.
Written by: James Politi
© Financial Times