EU's Tusk Warns Trump Trade Wars Can Lead to ‘Hot Conflicts’

(Bloomberg) -- European Union President Donald Tusk called on Donald Trump to reform the world order rather than bring it down, warning that trade wars can lead to “hot conflicts.”

Tusk issued his appeal in opening remarks to an annual EU-China summit on Monday, as he made an explicit link between the European delegation visiting Beijing and the U.S. president's meeting later the same day in Helsinki with Russian President Vladimir Putin. The comments came a day after Trump called the EU his biggest “foe” due its stance on trade.

“The architecture of the world is changing before our very eyes and it is our common responsibility to make it a change for the better,” Tusk said.

One sign of that shift came when the EU and China agreed to issue their first joint summit statement in three years. Premier Li Keqiang touted the document as evidence of a willingness to cooperate to uphold the global order and preserve a multilateral approach to solving world problems.

The summit sketched out progress toward a bilateral investment treaty and on industrial policy, while targeting the conclusion of stalled negotiations on geographical indicators for goods like Champagne. Both sides also agreed to set up a working group to reform the beleaguered World Trade Organization, a move that Tusk called on Trump, Putin and China to embrace “to prevent conflict and chaos.”

After decades of peace building that helped end the Cold War and spur China's rise, “it is the common duty of Europe and China, but also America and Russia, not to destroy this order but to improve it,” said Tusk. That means “not to start trade wars, which turned into hot conflicts so often in our history, but to bravely and responsibly reform the rules-based international order.” 

The remarks reflect the deteriorating relations between Europe and the U.S. after Trump hit the EU with tariffs on steel and aluminum, withdrew from the Iran nuclear deal and the Paris climate accord, and badgered European nations over defense spending. Trump added insult to injury by saying in a CBS interview released Sunday that he regards the EU as his top “foe” for “what they do to us in trade,” followed by China and Russia.

Trump Calls European Union a U.S. Foe, Citing Trade Tensions

Trump's attacks on key U.S. allies have stood in contrast to his lavish praise for Putin and North Korea's Kim Jong Un. Even so, Chinese Premier Li said the EU meeting was not targeted at any third party, adding that trade friction with the U.S. was a “bilateral” issue for China and the Trump administration to work out.

It was an indication of China's desire to avoid inflaming tensions with Trump any further, since it already faces potential U.S. tariffs on $200 billion of goods. It also hinted at EU-China disputes -- from European concerns over intellectual property to EU attempts to screen Chinese investment -- that rule out the two economic powers lining up against the U.S. any time soon.

While there are signs that China is reaching out to Europe, there is little indication that Europe is ready to turn away from the U.S. just yet. In fact, the EU broadly agrees with the U.S. criticism of China, but not with its use of punitive tariffs to force change, according to two people with knowledge of the 28-member bloc's approach to the summit.

How China Bought Up A Swath of Europe When Nobody Was Looking

China and the EU together account for about one third of the global economy, yet European foreign direct investment into China has reached a cap, said EU Commission President Jean-Claude Juncker, alluding to persistent complaints about reciprocal market access. Germany's VDMA machinery makers lobby urged a hard line against China in a statement on the eve of the summit, saying that state subsidies for manufacturers linked to the Made in China 2025 program make a mockery of greater domestic competition.

“The EU remains critical of China on several key issues, very much in line with the U.S. administration, most notably subsidies” along with “remaining barriers to entry, particularly technology transfers requirements,” said Federico Santi of Eurasia Group.

Rather than demonstrate a united front with China, according to Eurasia's Santi, the summit was set to “show the limits of EU cooperation with China in the face of U.S. protectionism.”

To contact Bloomberg News staff for this story: Peter Martin in Beijing at pmartin138@bloomberg.net;Dandan Li in Beijing at dli395@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, ;Brendan Scott at bscott66@bloomberg.net, Daniel Ten Kate

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