When he became the Republican candidate for the 2016 Presidential Election over four years ago, Donald Trump promised to ensure that American trade would not be disadvantaged by other countries. He has succeeded in delivering on his promise so far to a certain extent.
Although some critics say there is little substance behind China and America ending their trade war by signing Phase One of their trade agreement, Trump can still claim an achievement heading into the 2020 Presidential Election.
The new deal slashes tariffs on $120 billion worth of products, but most of the steeper duties – which affect another $360 billion of Chinese goods and more than $100 billion worth of US exports – remain.
In another victory for Trump before this year’s election, Republican Senate Majority Leader Mitch McConnell stated that his chamber could approve of the USMCA (United States-Mexico-Canada Agreement) at the end of this week.
These trade deals represent substantial achievements for a President committed to fairer trade for the US, and they can provide the GOP with plenty of ammunition for this year’s election.
Nonetheless, there is one crucial trading partner that Trump has failed to reach an agreement with, and that is the EU. In August, Trump hinted that the US will be able to reach a fair trade deal with the EU without imposing proposed tariffs on car imports. He also said he planned on visiting Germany to discuss a trade pact with German Chancellor Angela Merkel. Merkel said herself she wants trade discussions to be concluded ‘as quickly as possible.’
But the escalating Iranian crisis could now become the latest stumbling block in Trump’s bid to reach a trade pact with Brussels. Washington has threatened to impose a 25 percent tariff on European automobile imports if Britain, France and Germany do not formally accuse Tehran of breaking the Joint Comprehensive Plan of Action.
This is despite the fact that the three nations triggered a dispute mechanism under the agreement on Tuesday, accusing Iran of violating its terms. This could lead to the reinstatement of UN sanctions lifted under the pact.
Iran has now become a bargaining chip for the Trump administration. According to the Washington Post, he wants to use Tehran to receive better terms for Washington within the US-European trade relationship, not to shift European foreign policy.
This is a huge gamble for the President. He has a limited timeframe to reach an agreement with the EU and if London, Paris and Berlin all refuse to shift their positions on the Iran Deal, despite being imposed with a fresh round of tariffs, both sides will only prolong their current stalemate. It will be a devastating double blow for the Trump administration’s foreign policy.
Even if he succeeded in using the threat of tariffs to force those three European nations to support Washington’s position on Tehran, both the US and the EU have failed to make any progress towards a trade pact or tariff reductions. In October, the Trump administration planned to introduce duties of 25 percent for agricultural products like French wines in response to EU subsidies for Airbus.
There is still time for Brussels and Washington to compromise on trade and for European nations to be persuaded to support Trump’s position on Iran. Perhaps Tehran is the ‘trump card’ the President needs to win his trade war with the EU and persuade Europe’s three most powerful countries to support his proposal to renegotiate the Iran Deal.
But Trump must use what time he has left wisely to reach an accord with his European allies on these two crucial issues, otherwise, his opponents will go into the 2020 election claiming he has alienated America’s closest partners. The consequences of the President’s latest threat are yet to become apparent.