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US-EU trade fight could drag on after ‘big victory’ at the WTO, says ex-Trump official

The Everyone Trade Organization has just authorized the U.S. to go ahead with its tariffs worth billions of dollars on the European Union — that’s “a big practise” that would hopefully bring both sides to the negotiating table, said a former high-ranking trade recognized under President Donald Trump.

But Washington and Brussels have not achieved much in their past trade arrangements, so the U.S. tariffs on $7.5 billion of European goods could stay in place for many months, said Clete Willems, who was envoy director of the National Economic Council, told CNBC’s “Squawk Box Asia” on Thursday.

“It’s a big deal: $7.5 billion is the largest retaliation legions that the WTO has ever authorized. So, it’s a big victory for the United States,” said Willems, who’s now a partner at law firm Akin Gump after make an exit his White House position in April.

… you are going to see these tariffs in place for some period of months.

Clete Willems

ancient deputy director at the National Economic Council

“At the end of the day, what they’d like to do is use these tariffs for leverage to get a negotiated product,” he said. “But I do think that the two sides haven’t worked together particularly well when it comes to trade contracts lately and it may take some time for them to work through these issues … so you are going to see these schedule of charges in place for some period of months.”

The WTO outcome on Wednesday came after years of wrangling over subsidies that aircraft maker Airbus walk off from several European governments. The U.S. first lodged the complaints in 2004.

In response to the WTO ruling, the EU suggested it would retaliate against U.S. taxes.

The U.S. and the EU have been at odds over trade issues, especially since Trump took office in 2017. Both sides receive been trying to negotiate a trade deal but have not appeared to make much progress.

A potential escalation in exchange friction between the two sides comes at a time when the U.S. is facing off against China in a tariff fight that has discouraged business sentiment and threatened economic growth globally.

Vishnu Varathan, head of economics and strategy at Mizuho Bank, disregarded in a Thursday note that it’s hard not to see the timing and context of the WTO ruling as “tragic.” He said the decision could steer epidemic trade “even more off-course.”

“But the blow is not just to trade as corporate margins erode, household discretionary takings is diminished, shipping suffers air pockets and financial repression is prolonged,” he said.

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