Trade war means economic crisis all over the world

If trade tensions between the U.S. and China continue to escalate, that may have a “direct and very negative impact all over the world, especially Europeand the Eurozone, ” according to French Finance and Economy Minister Bruno Le Maire. In fact, Le Maire said the tariffs battle, which kicked off last year, has already reached beyond the world’s two largest economies. Speaking with CNBC over the weekend at the G-20 Finance Ministers Meeting in Fukuoka, Japan, he said Europe is already performing worse than it otherwise would because of the ongoing U.S.-China trade war.

He pointed, in particular, to the French and German economies as examples of those caught in the crossfire. “We do not have the growth figures we should have because of the trade tensions between the U.S. and China,” Le Marie said. “I want to be very clear, a trade war would mean an economic crisis all over the world, and especially in Europe,” he told CNBC’s Nancy Hungerford.

Le Maire isn’t the only European official concerned about the trade tensions. Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, expressed the same sentiment. “We are of course concerned by the trade tensions (between the U.S. and China) ... because we are the most open economy in the world,” said Moscovici. “That’s why we are so attached and it is one of our values to free economy, to open economy, to free trade, to multilateralism, that’s why we’re so reluctant against protectionism.”

Moscovici emphasized, “The trade tensions is the worst threat to the world economy.” Le Maire said that, during a recent meeting with U.S. Treasury Secretary Steven Mnuchin, the American official suggested he wants to avoid escalating the trade war. That will depend, however, on the results of the highly anticipated meeting between Chinese President Xi Jinping and U.S. President Donald Trump later this month. ‘A clear difference’

When asked whether France will comply with U.S. government requests to bar next-generation networking equipment from Chinese telecommunications giant Huawei, Le Maire responded that it is not about the specific company. Instead, he said, his country is focused on the larger picture, which is to ensure national sovereignty in France.

He added that the Chinese tech behemoth currently plays an important role in France’s use of 4G technology, the current mobile networking standard. No matter the decision on Huawei, Le Maire said, the French government will be very “vigilant” in guaranteeing that 5G technology — which promises to underpin advanced tech such as driverless cars — will not harm citizens’ sovereignty or independence.

Some have suggested that Washington’s recent campaign against Huawei is part of an attempt to gain leverage on its trade talks with Beijing. For his part, Le Maire said that governments should not be mixing trade and non-trade issues. “We need to make a clear difference between ... sovereignty, key technologies on the one side, and trade on the other side,” he said.

“Trade tariffs do not have anything to do with the technologies. We want to have a fair trade,” he added. “We want to build a trade that will be more efficient that will feed growth in the future and for that we have to avoid hitting countries with new tariffs and entering into a trade war.”
The White House has also been criticized for mixing tariffs with non-trade issues for U.S. President Donald Trump’s threats to hit Mexico with new tariffs in order to extract assistance on immigration issues.

Although the U.S. and Mexico were able to reach a deal to avoid tariffs, European Commissioner Moscovici said that “linking migration and trade could sound a bit strange.” He emphasized that the U.S.-Mexico dust up is importantly different than Washington’s trade war with Beijing because it’s more significant for the global economy and it’s less easy to get China to cave.

Mnuchin, meanwhile, defended Trump’s approach, and when asked if trade could again be used as a weapon in non-trade disputes, said, “I think it’s very important that we have all these tools, that we use them.” On Huawei, the Treasury secretary claimed the U.S. actions weren’t about trade — but suggested that Trump may soften the stiff restrictions that the U.S. has slapped on the Shenzhen-based company after feeling satisfied on the trade issue.

“They’re separate from trade: Both we and China have acknowledged that in our discussions,” he said. “Now, of course, President Trump, when he has the meeting (with Xi), to the extent he gets certain comfort on Huawei or other issues, obviously we can talk about national security issues, but these are separate issues, they’re not being linked to trade.”

Highlight
• French Finance and Economy Minister Bruno Le Maire says if the trade tensions between U.S. and China continue to escalate, that would have a negative impact all over the world — especially in Europe.
• He says Europe’s economy is already performing worse than it otherwise would because of the ongoing trade war between the U.S. and China.
• Governments need to clearly distinguish between national security concerns and trade disputes, the French official says.