Europe has the luxury of waiting to see how China’s retaliation against US President Donald Trump’s controversial tariffs plays out before deciding its own course, an expert on US trade policy has said.
Rohit Kumar, co-head of PwC’s national tax services practice in Washington, told The Irish Times that while he was “loathe to say never”, global trade relations were unlikely to return to pre-existing norms at least in the medium term of five to 10 years.
US tariffs unleased on the global economy last week have sent financial markets into turmoil and sparked a mixed response among nations regarding how best to respond. While the European Union considers its next move, Mr Kumar said it had the advantage of observing other reactions already in train.
“There may be some value, at least in the short term, in a wait-and-see approach,” he said during a visit to Dublin on Tuesday.
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“At some level the European Commission has the luxury of seeing how retaliation plays out through China, see how other countries are engaging in negotiation and deciding which course of action might be preferred based on, let’s see how things play out [between various parties].” The European Commission is the executive arm of the EU and formulates trade policy.
China moved quickly to announce 34 per cent tariffs on US goods, prompting Mr Trump in turn to threaten a further 50 per cent tax, in a back-and-forth that threatens to see the global trade conflict spiral.
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Mr Kumar said, however, while that may act as a form of bellwether, the US-China trade relationship was in a class of its own, particularly in terms of US domestic politics where there was more willingness to impose trade measures.
Before joining PwC, Mr Kumar served as domestic policy director in the office of former Senate Republican leader Mitch McConnell, as well as previous stints with several other Republican senators, giving him some insight into the current political environment.
During his time on Capitol Hill between 1995 and 2013, he said Ireland was looked upon with “admiration” as an example of what an economy with a modern international tax regime could achieve.
“At no point during my career did I ever run into any sort of ill will towards Ireland or the Irish tax system. It just wasn’t a thing, it was more like: this shows the flaws of the US system.”
At a PwC tax event in Dublin last year he anticipated tariff rates of between 10 and 15 per cent in the event of a second Trump term. The imposition of tariffs was not a surprise, he said, although the level the administration went to perhaps was.
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“There’s a very clear split, even within the administration, about whether these tariffs are designed to be leverage for a negotiation or ... a more durable feature of the US economic system in the short run to raise revenue and in the long run, perhaps, to cause more economic activity to happen inside the US.”
Among lawmakers in the US, Mr Kumar said most were pro-free-trade but willing to tolerate tariffs as a negotiation tactic. However, there was not yet enough impetus to resist them politically given the 18 month run-in to the next elections.
“There hasn’t been consistent messaging from the entirety of the administration about whether it is tariffs for the sake of tariffs or tariffs for the sake of leverage.”
