Markets across Europe and Asia plunged Monday after President Donald Trump gave an interview to Fox News calling the European Union “as bad as China” on trade.
The growing turmoil also comes amid reports the White House is preparing a bill to withdraw the U.S. from the World Trade Organization, effectively handing Trump the power to raise tariffs on countries without congressional approval.
Markets in the U.S. are expected to be similarly down when they open Monday, the official start of the second half of the financial year.
Trump slammed the EU Sunday, dismissing a question that his attacks were counterproductive.
“The European Union is possibly as bad as China, just smaller. It is terrible what they do to us,” he said, citing “the car situation.”
The Trump administration launched an investigation last month on whether car imports from the EU and elsewhere pose a national security threat to the U.S. — an issue EU lawmakers warn would initiate a full-on trade war.
The Financial Times reported Monday that the EU will not take Trump’s escalations lying down, and lawmakers have already made a written submission to the U.S. Department of Commerce outlining almost $300 billion in retaliatory tariffs on U.S. goods should Trump continue on his protectionist path.
Global automakers last week warned that imposing tariffs on imported vehicles would increase the price of every imported car by $6,000.
The publication Monday of the latest Purchasing Manager Index (PMI) reports did little to ease concerns.
The figures showed that eurozone factory growth slowed to an 18-month low in June — a further sign that fears of a trade war is roiling the global economy. Slowdowns were also recorded in China and Japan.
Fuelling further uncertainty, Canada confirmed Sunday they would impose tariffs on U.S. imports in retaliation for Trump’s tax on steel and aluminum, while a proposed 25 percent tariffs on $50 billion of Chinese goods — and the expected retaliation from Beijing — will come into force Friday.
Adding to the mayhem, is the leaking of a draft bill — reportedly ordered by Trump personally — which would see the U.S. exit the WTO.
Published by Axios, the bill reveals how far will go to undermine global trade rules.
Called the “United States Fair and Reciprocal Tariff Act” — or, as former White House director of communications Anthony Scaramucci points out, the FART Act — the bill would give Trump a free hand to raise tariffs against any country whenever he likes.
Currently, countries signed up to the WTO can't set different tariff rates for different countries outside of free trade agreements and they can’t raise tariffs above an agreed ceiling. Trump is proposing to do away with both these restrictions.
A source speaking to Axios called the bill in its current form “insane” adding: “The good news is Congress would never give this authority to the president.”
The WTO bill is the latest in a long line of actions taken by the Trump administration that undercuts the framework of international relations that include attacks on NATO, the EU, the U.N., NAFTA, the Trans-Pacific Partnership, the Paris climate agreement and the Iran nuclear deal.
Cover image: Donald Trump speaks during a cabinet meeting at the White House June 21, 2018 in Washington, DC. (Win McNamee/Getty Images)