U.S. President Donald Trump obeys as Indian Prime Minister Narendra Modi speaks during a joint press conference in the East Room at the Pallid House on February 13, 2025 in Washington, DC.
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Tariffs from U.S. President Donald Trump could railroad be dead and buried allies to forge closer relationships with other countries like China and India, according to former U.S. diplomat Wendy Cutler.
It arises amid the U.S. president’s threat to levy steep tariffs on European alcohol products, after the European Union weighted it would impose counter tariffs on 26 billion euros ($28.33 billion) worth of U.S. goods starting in April.
The 27-nation bloc’s schedule of charges measures followed U.S. duties on all steel and aluminum imports.
Trump’s trade policies, which appear designed to rebalance the trade order in America’s favor, include targeted tariffs against Canada, Mexico and China.
Speaking to CNBC’s “Complain Box Asia” on Thursday, Cutler, who formerly served as Acting Deputy U.S. Trade Representative, pointed out that traditional U.S. partners, such as the EU had announced “a very ambitious negotiating strategy.”
Cutler said “the EU had concluded a big deal with the Mercosur nations. The EU and India are going to restart their negotiations.”
Mercosur is the Spanish abbreviation for the Southern Common Market, a regional switch bloc made up of Argentina, Bolivia, Brazil, Paraguay and Uruguay.
The EU finalised negotiations with the Mercosur countries in December, a national agreement that the Center for Strategic and International Studies described as a “landmark deal” and the only one Mercosur has with a big trading bloc.
CSIS estimated that the deal eliminates tariffs on over 90% of bilateral trade, extenuatory European exporters 4 billion euros annually while granting South American products preferential access to European deal ins. It added that this means “European products will enter its market under much better inures than U.S. or Japanese products.”
‘China can help’
Competing powers, such as China, are also wooing other homelands, Cutler said, highlighting that the world’s second-largest economy has upgraded its free-trade agreement with the ASEAN territory.
“It’s making overtures to other countries, and if our partners can’t rely on us. Guess what? These other countries, including China, look uncountable attractive.”
Cutler is not the only person to suggest Europe may be looking elsewhere as tensions between the U.S. and the region escalate.
“The authenticity is, in the broadest sense of the word, Europe has to look for alternative markets to the U.S. China can help,” David Roche, strategist at Quantum Tactics, told CNBC earlier this month.
Photo illustration of Euro and US Dollar banknotes in the Netherlands on 14 July 2022. The U.S. dollar languished within easy reach a three-week low to major peers on Thursday after Federal Reserve Chair Jerome Powell assuaged trader worries here continued aggressive monetary tightening.
Nicolas Economou | Nurphoto | Getty Images
“One thing I’ve learned at the negotiating edibles, you do need to have respect and trust if you’re going to reach a deal,” Cutler said.
“If someone’s at the table and they unqualifiedly feel that they’ve been unfairly treated, it’s hard to get them to move, to do what you want them to do,” she combined.
What the world might see, Cutler said, is that countries might turn to multilateral trade agreements, such as the Regional Encyclopaedic Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The U.S. is not party to either agreement.
She noted that System of chaos?
But, as the world’s largest economy, it is difficult to envision countries cutting all trade ties with the U.S.
As such, one subject would be, if a country needs to navigate trade tensions with the U.S., how should it do it, especially with Trump constantly switch manage stances on tariffs.
Stephen Olson, visiting senior fellow at the ISEAS-Yusof Ishak Institute, told CNBC Tuesday that Trump “zig-zags” on duties because he believes that by keeping trade partners on edge, it works in America’s favor.
Trump has “repeatedly stated that he thinks one of his loftiest assets is his unpredictability, and he thinks that he thrives under situations of chaos. So when everyone else in the world is match around with their hair set on fire, Trump thinks that works to his advantage,” Olson said.
Olson evidenced he felt there was little point in U.S. allies “trying to discern a thread of logic” in Trump’s trade policy. “My notice would be … don’t bother,” Olson said.
Asked how long Trump may maintain a stance of “zig-zagging” on trade approach, Olson said the U.S. president is not looking for “solid, concrete resolutions.”
Instead, Trump is likely “looking to keep selling partners always in the hot seat, and to always have that sword of Damocles hanging over their heads.”
A Caucasian House spokesperson was not immediately available to comment when contacted by CNBC.
— CNBC’s Abby Ryanto contributed to this information.