Global Trade Talks Consume Plans of Four Biggest Growth Engines

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Diplomatic efforts to end a global trade war are expanding to multiple fronts as the European Union and Japan begin talks soon with President Donald Trump’s administration just as the U.S. looks to seal a deal with China.

As negotiations between Beijing and Washington press ahead, Japan this week steps into a fight it had managed to dodge for more than two years: bilateral trade talks with Trump. On Monday, EU ministers gave the green light to start negotiations with the U.S. as both sides seek to mend frayed relations a week after threatening each other with billions of dollars in new tariffs over a 14-year-old aviation dispute.

With the world’s four biggest economies haggling over the rules of cross-border commerce, the stakes for growth are high. At its spring meeting in Washington last week, the International Monetary Fund cut its outlook for the global expansion to the weakest since a worldwide recession in 2009.

The wild card in all the talks is Trump’s looming threat to impose tariffs on imports of automobiles and parts. Here’s an update on where the talks stand:

Japan-U.S.

For Japan, the world’s third-largest economy, there’s a lot at stake in the talks that take place this week in Washington. Prime Minister Shinzo Abe is desperate to avoid tariffs or quotas on auto exports, as Trump wants to crack open Japan’s agricultural market and reduce a $60 billion trade deficit.

Abe has poured energy into courting Trump to maintain a strategic relationship that secures his country against potential threats from North Korea and China. But that doesn’t mean Japan will roll over on trade: Abe’s government is determined to avoid giving the U.S. a better two-way deal than the multilateral pacts he’s negotiated with Europe and Pacific Rim nations.

China-U.S.

By several accounts, the world’s two biggest economies are getting close to resolving their differences and announcing a deal. The latest wrinkle that Bloomberg News is reporting on Monday: China is considering a U.S. request to shift some tariffs on key agricultural goods to other products. That would help Trump sell any eventual deal as a win for farmers ahead of his 2020 re-election bid, people familiar with the situation said.

Over the weekend, Treasury Secretary Steven Mnuchin said the U.S. and China were “hopefully getting very close to the final round” and discussing whether to hold more in-person trade talks. He also said the U.S. is open to facing “repercussions” if it doesn’t live up to its commitments in a potential trade deal, a sign that the two sides are edging closer to an accord.

EU-U.S.

The EU is trying to do its own limited deal with the U.S. president to address tariffs on industrial goods, in part to avoid levies Trump threatened on foreign automobiles and car parts. Negotiations expected to start in coming weeks would come amid escalating transatlantic tensions, with the U.S. having accused the EU of not acting in good faith and delaying the start of talks.

Trump’s car-tariff warning, which would be based on the same national-security grounds used for controversial duties last year on foreign steel and aluminum, will weigh heavily on discussions, with the EU bristling over the idea that it poses a threat to the U.S.

The tone of the talks hasn’t been great. Last week the U.S. threatened to seek $11 billion in damages through duties on European goods to counter European government aid to Airbus SE. In retaliation, the EU is considering hitting U.S. goods ranging from handbags to helicopters with retaliatory tariffs to the tune of 10.2 billion euros ($11.5 billion).

--With assistance from Yuko Takeo, Isabel Reynolds, Jonathan Stearns, Jenny Leonard and Steven Yang.

To contact the reporter on this story: Brendan Murray in Washington at brmurray@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Richard Bravo

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