(Bloomberg) -- Political and business leaders gathering for an economic conference in southern France over the weekend called on the European Union to flex its muscles and save a world trade system disrupted by U.S. President Donald Trump as tariff wars escalate among the U.S., Europe and China.
"If tomorrow, there were to be new hikes of tariffs on other economic sectors such as the auto industry, our reaction will have to be united again, strong, to show that Europe is also a sovereign economic powerhouse,” French Economy Minister Bruno Le Maire said during a panel at the Rencontres Economiques conference in Aix-en-Provence on Sunday. If "you attack us again and impose tariffs say on car makers, be warned that we will react," Le Maire said in an address to the U.S. administration.
The U.S. in March used a seldom-used national-security law to impose levies on steel and aluminum imports, drawing a tariff response from the EU targeting companies in sensitive political locations for Trump, such as motorcycle maker Harley-Davidson Inc. in Wisconsin, and Kentucky whiskey distiller Jack Daniel’s.
The trade war escalated just after midnight in Washington on Friday. The U.S. imposed tariffs on $34 billion of Chinese imports, a move aimed at rallying his political base even if it runs the risk of harming the U.S. and other economies.
Beijing immediately said it would be forced to retaliate, as have other countries including EU members faced with the same prospect, prompting business leaders and policy makers to express concerns that it will hurt investments.
“Strong questions on the global trade system, ranging from Brexit to the trade war between the U.S. and China, are a concern for companies regarding a rather key decision: investments," said Jean-Pierre Clamadieu, chief executive officer of Belgian chemicals maker Solvay SA, on the sideline of the economic conference.
The company may not be able to invest in the U.S. if retaliatory tariffs from Europe and China make it harder to export products, Clamadieu said. He also expressed concerns that cracks might appear in the European front after a German business group called for negotiations to lower U.S. import barriers for German cars to zero even as German Chancellor Angela Merkel denied such plans.
The French economy minister also urged European nations to stick together. He accused the U.S. of being willing to divide France and Germany over trade issues, and China of seeking to split Western and Eastern European nations, following a July 7 meeting between Chinese Premier Li Keqiang with central and eastern European leaders in Bulgaria.
"The tragedy of a trade war is that it hurts everybody," Kevin Sneader, global managing partner at Mckinsey, said in an interview in Aix-en-Provence on Friday. "If it escalates, then it will have a significant impact on the global economy."
"Given that the U.S. have fundamentally changed the rules of the game, the only efficient response is a European one," said BlackRock Inc. Vice Chairman Philipp Hildebrand. "Europe must create its own moment of leadership to find an appropriate response."
Trump has rattled global capitals since taking office, drawing sharp criticism from Germany and France for his withdrawal from the Paris climate-change accord and his attacks on the effectiveness of the North Atlantic Treaty Organization.
European leaders are bracing for a potentially testy NATO summit to be held in Brussels on July 11-12.
"Europe has a card to play" in the power battle between China and the U.S.,
International Monetary Fund Managing Director Christine Lagarde said ahead of EU-China summit in Beijing on July 15-16. "Neither side has enough strength alone so Europe is strategic for both," she said.
"It’s true that the world order is profoundly called into question," European Central Bank Executive Board member Benoit Coeure said during a panel on Sunday. "It’s absolutely necessary to resist the temptation of euro pessimism or a feeling of powerlessness of Europe versus China and the U.S.”
The EU is "the largest economic force" in the world and "the most ambitious alliance of nations in the history of humanity." It has the tools to respond if it overcomes its divisions, Coeure added.
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