Call it the trade tango — and it’s President Trump’s favorite dance.
It’s a step China has had to learn and one that France is picking up on now. Next up could be Italy, another key exporter of fashion products.
Trump kicked off his presidency declaring an “America First” agenda and he has proven he’s ready to use tariffs — and a supercharged and rapidly swinging rhetoric — as he pushes toward his own definition of that goal.
While the multitasker in chief fended off an impeachment inquiry at home, he was in Europe Tuesday exhibiting his trademark give-and-take on trade, putting himself at the center of it all.
“The China trade deal is depending on one thing: Do I want to make it,” Trump said. “We’re doing really well with China right and we can do even better with a flick of a pen.”
Trump said he might even wait until after the election next year to seal a deal with China — something fashion importers have long been waiting for as they not only navigate a changing consumer market, but do it without knowing how to set their supply chain or what their costs will be.
The potential of another year of trade uncertainty riled Wall Street, sending the Dow Jones Industrial Average down as much as 1.6 percent before blue chip stocks closed off 1 percent to 27,502.81. Trump also teased that the digital tax issue threatening 100 percent tariffs on $2.4 billion worth of imported French products, including handbags, cosmetics, cheese and Champagne — and a worry for Italy as well — was just a small part of a larger issue between “friends.”
Sitting with French president Emmanuel Macron, Trump complained about the U.S. trade deficit with the European Union, barriers to U.S. goods in the market and said the French digital services tax, seen as targeting U.S. firms such as Google and Amazon, was the “least” of the issues pending between the two powers.
That has Trump casting his administration’s newest trade fight as something of a sideshow — for now, at least.
That sideshow was a bombshell dropped late Monday by Trump’s trade ambassador Robert Lighthizer, who said U.S. was moving to counter “growing protectionism of EU member states” and could impose 100 percent tariffs handbags, cosmetics, wine and cheese from France.
(Lighthizer also said his office was “exploring” whether or not to open similar investigations into Austria, Italy and Turkey, where digital services taxes seek to recoup a portion of the business conducted online for governmental coffers).
The U.S. Trade Representative’s office will be collecting public comments on the proposed duties on French goods until Jan. 6. No date was given for when the 100 percent duties might go into effect.
Supply chain research group Panjiva said the goods in question amounted to 4.1 percent of all French exports to the U.S. The company, a part of S&P Global Market Intelligence, said the French beauty industry would be hit hardest with imports worth $842 million annually, followed by Champagne at $806 million and handbags at $434 million.
French luxury giant LVMH Moët Hennessy Louis Vuitton is represented in all three categories, although Panjiva said it is the privately owned Longchamps that was the biggest shipper of handbags threatened by the tariffs.
LVMH’s stock fell 1.5 percent to 390.70 euros, while Kering slipped 1.9 percent to 530.30 euros and Hermès declined 2.5 percent to 648.20 euros. Representatives for LVMH, Kering and Hermès had no comment on the possible duties.
Stephen Lamar, executive vice president of the American Apparel and Footwear Association, said the threat of tariffs on France could also send a message to China.
“The idea that we can hit our friends sends a message to the people who are sort of the more difficult trading partners,” Lamar said.
While Lamar opposes new tariffs in both cases — against China and France — he said the industry might have to get ready for more of the same.
“The president weaponized tariffs and used them pretty aggressively, almost casually…and I think he’s probably also normalized it,” Lamar said. “The tariff genie is out of the bottle.”
And Lamar said Trump’s successor — whether in one year or five — is likely going to pick up on the tactic. That means fashion might have to get ready for tariff threats — which tend to lead to more tariff threats and so on.
Speaking on French radio on Tuesday morning, France’s finance minister Bruno Le Maire called U.S.’s proposed sanction “unacceptable.”
“The French tax on digital activities aims to reinstall fiscal justice,” he said. “It targets American companies, but also Chinese and European companies. It’s not discriminatory.”
Le Maire criticized the U.S. position, claiming it went against the commitment that was made during the G7 Summit in France in August.
“This isn’t the behavior that is expected of the United States toward its main allies, France and Europe,” he said. “We have contacted the European Commission to make sure that if there were to be more American sanctions, there would be a European reaction, a strong retaliation.”
During a press briefing Tuesday, a Commission spokesman said: “In this, as in all other trade-related matters, the European Union will act and react as one and it will remain united. We are coordinating closely with French authorities on next steps.”
And Trump, of course, had plenty of his own tough talk when it comes to the U.S.’s deficit with the EU of more than $150 billion.
“We can make a deal,” Trump said. “We can take a harsh approach. We could solve that problem instantaneously if we wanted to, but I don’t do that. These are friends of ours.”
Before Trump, that kind of harshness was unusual in the high-stakes world of global trade negotiations.
Duncan Edwards, chief executive officer of BritishAmerican Business, a trans-Atlantic trade, policy and advocacy group, said: “This administration and the president’s approach to negotiating is unusual for government because it’s much more like a very aggressive business negotiation, where you change the terms at different times and so forth so no one quite knows where they stand.”
But still, despite all its brashness and the potential collateral damage, Trump’s approach might have helped break a logjam of sorts.
“China has not been a good corporate citizen when it comes to playing by the rules of international trade and so something needed to be done about that,” Edwards said, noting the previous two administrations didn’t get very far in their negotiations with China.
“This more muscular approach to China has a lot of support in the business community,” Edwards said.
That might not include the fashion business community, but if Trump’s seemingly endless trade wars work, everybody can expect a lot more of them.