EU preparing legal challenge against Donald Trump’s US border tax plan in what could be biggest trade dispute in a century
EU lawyers are preparing to mount a legal challenge against President Trump’s hugely controversial US border tax proposals in what could be the biggest case in World Trade Organisation history.
Mr Trump’s proposed “border adjustment system” would see US imports subjected to tax, while export revenues exempted. The reforms have been described as potentially one of the biggest shake-ups in trade in the past century.
Bu according to the Financial Times, lawyers in Brussels are already gearing up to challenge Mr Trump’s proposals.
Jyrki Katainen, the European Commission’s Vice President, told the newspaper: “If someone is behaving against our interests or against international rules in trade then we have our own mechanisms to react.”
He said the EU was seeking to avoid a potential trade war with the US as it would be “disastrous” for the world economy.
“We have all the legal arrangements within the EU but we are also part of global arrangements like the WTO and we want to respect the global rule base when it comes to trade.”
Chad Brown, a WTO trade dispute expert, told the FT that a defeat in such a case could see around $385bn (£307bn) a year in trade retaliation against the US.
It comes after regulators in China began examining whether Mr Trump’s economic protectionism could lead to higher US tariffs which could make cross-border trade a headache of Asian countries.
China’s foreign exchange regulator began surveying firms in Shanghai in early February about the impact on cross-border trade of possible protectionist measures by the United States, two sources said on Tuesday.
The State Administration of Foreign Exchange (SAFE) is asking firms with large trading operations and cross-border payments with the United States whether they have U.S. production facilities, their tolerance for higher tariffs, and how they would deal with the higher tariffs, said one of the sources.
President Trump has repeatedly threatened to slap higher tariffs on Chinese imports in retaliation for what he claims are unfair trade practices, though he has yet to follow through on the threats since taking office on Jan. 20.
“It is still in the survey phase.
Every foreign trade firm’s situation is different. If there really was a trade war, there will be pressure,” said the source.
“A growing number of investors are worried that potential trade wars with Mexico and China could lead to tariffs and higher prices,” David Woo of Bank of America Merrill Lynch said.
“With many investors having loaded up on Trump trades after the elections, their willingness to continue to give the benefit of doubt to the new administration appears to be wearing thin.”