Earlier this week (Tuesday 13 March), Ed Reilly, Senior Advisor and former CEO of FTI Consulting’s strategic communications segment, shared his thoughts and insights about the storms that are overshadowing the transatlantic trade relationship at a discussion at FTI Consulting in Brussels. The debate was moderated by John Clancy, Senior Advisor at FTI Consulting and spokesperson of former EU trade Commissioner Karel De Gucht. The event focused on the looming threat of 25% tariffs on steel and 10% on aluminium to be imposed on multiple trade partners including the EU. In attendance were many representatives from across the Brussels’ public affairs sector.
As a long-time Washington insider, Ed offered his perspective on the political situation in the United States that often feels alien and incomprehensible to watchers from the Brussels Bubble. Ed made clear that President Trump has to live up to his electoral promises to his 35% unshakable supporters. For many of Trump’s voters the free trade argument has not delivered, despite almost full employment and growing wages. Critical discussions about these issues will not gain any votes; instead Trump is riding on the politics of resentment.
The Washington establishment, including Republicans, is almost as shocked as political observers in Europe. The reality in DC has been turned on its head, with free trade Republicans, who are supporting a protectionist President and progressive Democrats suddenly aligned with Trump.
So the question is whether the US is really prepared to enter into a trade war that will only see losers. In Ed’s view, a trade war is not something Trump needs but has a natural disposition to want. It would take the edge off the growth generating reforms Trump has pulled through and in the end it will lead to a higher deficit. However, the “do it alone” attitude might be part of the American culture and the global interconnectedness is not easily understood. In addition, the growing trade deficit with the EU and in particular Germany and its car sector seems to be an itch Trump wants to scratch.
However, Ed sees some reasons for hope: The majority in the US still feels close to Europe as a long-term security partner. This link is stronger than with many other countries. So far the guardrails are holding and until now the more provocative announcements of Trump have worn off over time.
Ed also had some advice on how the EU should react to Trump’s trade threats which may come across as a bomb blast. The EU should wait to see what is actually implemented. In addition, the EU should engage directly with US voters, not only in Washington but also at the state level, including governors. Europe should emphasise the shared security interests and the joined fight against terrorism. So far this card has been underplayed.
Business also can do its share. Today there is a void that is being filled by populists and the business community is not adequately pushing back. US policymakers need rational, fact-based arguments that can show what success looks like. European companies that have invested in the US should speak up and remind US voters that they are creating jobs in the US.
The next weeks and months will keep us busy and until now the European Commission seems to follow the measured approach suggested by Ed Reilly. But there is no doubt the EU will hit back if punched. The European Parliament is also active and reaching out to counterparts in congress. Meanwhile business should move into action. The Trade Leadership Coalition, managed by FTI Consulting, provides a platform for business in the US and abroad to raise its voice in favour of free trade.
Prior to the discussion John Clancy interviewed Ed Reilly on the latest developments in transatlantic relations. You find the link to the podcast here.
Arne Koeppel is Head of Research at FTI Consulting in Brussels.