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Europe Begins to Prep for a Trade War No-One Wants

Europe Begins to Prep for a Trade War No-One Wants
Source: BBC

I’ve been hearing a lot from EU leaders and the CEOs of some of the region’s biggest corporations in recent weeks, both publicly and privately. It’s understandable. With events in Ukraine, a shift of their energy supply lines, and the risk of knock-on repercussions, including probable recession, they’ve got a lot on their plate.

However, I discovered that many were also anticipating a significant worsening in economic relations with the UK if the UK makes unilateral modifications to the Brexit deal related to Northern Ireland, and if those changes are declared illegal.

Herbert Deiss, the CEO of Volkswagen, Europe’s largest automaker, informed me that he had held high-level talks with the British ambassador in Berlin regarding the risk of a trade war.

“There is a great deal of communication going on here. In addition, there is a reliance “He informed me. “Bentley, a British brand, is doing exceptionally well… Also, because the UK is our largest export market in Europe for luxury brands like VW and Audi, I believe there will be a mutual interest to keep [trade] open today.”

While that is what everyone want, there is a calm acceptance that it may not be what they receive.

When asked if the tensions over Northern Ireland may escalate to a trade war at a recent private lunch, one European leader curtly said, “absolutely.” This specific leader was taken aback by the prospect of the pragmatic solution, which had been agreed upon by all parties, being ripped up. And it’s widely assumed that the prospect of a trade war causing “damage to your nation” stems mostly from intra-party politics rather than genuine worries for Northern Ireland.

Mateusz Morawiecki, the Polish Prime Minister, warned me that trade wars are a “lose-lose situation.” And he claimed that the main conflict over which he was attempting to reach an agreement was between Paris and London.

“We will do all we can to settle down the situation between France and the United Kingdom,” he said. “I believe that only Putin and our adversaries would be delighted with yet another conflict between such close friends as the United Kingdom and the European Union,” he said.

At the same occasion, Miche├íl Martin, the Irish Taoiseach, assured me that such a destiny would be “hopefully” averted since a trade war would be “shocking” and “unnecessary.”

When I asked if the EU was drafting a list of UK products against which tariffs might be imposed, Mr Martin said: “We’re not going to get into the specifics of anything like that because ideally, we’ll never have to think about it. For now, all I’m saying is go down there, get into the tunnel, UK government and EU, negotiate, and get the technocrats down there, as I’ve always said.”

In the weeks afterwards, Irish officials have walked the halls of Europe, warning of a “low moment” in EU-UK relations, and claiming that Berlin and Paris support a strong response.