Is Trump about to shift his trade fight to the Atlantic?

Markets once again weighed in on the question of whether a US-China trade deal is likely at the end of the month, with stocks gaining early on Tuesday in New York on signs that President Donald Trump is leaning toward siding with the free-trader camp in the White House.

Yet at the same time, fresh off a gloomy trip to Europe, the US president again complained about trade relationships with allies across the Atlantic, while his administration considers whether to slap tariffs on European cars.

One can be forgiven for finding the Trump administration’s approach to trade confusing. It is, after all, two different approaches.

There is the program championed by the top US trade official, Robert Lighthizer, and his sidekick, Peter Navarro. Then there is that advocated by Treasury Secretary Steven Mnuchin and economic adviser Larry Kudlow.

Lighthizer and Navarro are unabashed protectionists who envisage a long-term policy of tariffs on foreign-made goods revitalizing American manufacturers across all sectors of the economy. Kudlow and Mnuchin, meanwhile, have consistently voiced support for lowering trade barriers, suggesting that Trump’s tariffs are a short-term negotiating tactic to get other countries to open up markets and eliminate unfair trade practices.

Trump himself has kept the world guessing as to which side he agrees with at any given moment.

Navarro – who currently plays a role as a trade adviser to the president – articulated his protectionist vision in a speech on Friday, during which he hailed Lighthizer as the greatest trade representative in US history and made clear that Trump was on their side.

Kudlow quickly dispelled that notion on Tuesday, stating with conviction in front of a camera on the White House lawn that “Peter very badly misspoke.”

“He was freelancing and he’s not representing the president or the administration,” Kudlow continued.

The comments came on the same day as news reports that China’s point man for trade talks, Vice-Premier Liu He, spoke with Mnuchin on Friday and may even be visiting Washington before Trump meets with Chinese President Xi Jinping in Buenos Aires at the end of the month.

When taken together, that news, Kudlow’s apparent authority to speak on the status of trade talks with China – publicly reprimanding Navarro – and Trump’s own comments suggesting that a deal with China is shaping up give the impression that a truce is possible.

But just as a tentative ceasefire with Europe in July prompted speculation that the US was ready to focus more energy on pressuring China, a deal with Beijing could mean the Trump administration wants to revisit the possibility of picking a fight with Europe.

It was reported this week that Trump was meeting with trade advisers on Tuesday to discuss auto tariffs and he is “as jazzed as ever about hitting foreign-made cars with steep tariffs.”

Axios reported on Sunday, as Trump was getting the cold shoulder from European leaders on his trip to France, that the US president had been musing about using car tariffs to pressure trading partners in Europe.

“Trump says gleefully that the moment he started talking about maybe tariffs on cars, that [European Commission President Jean-Claude] Juncker got on the fastest plane known to mankind, comes straight over to Washington and starts offering deals,” a senior European official was quoted by Axios as saying. “This tells Trump that car tariffs is real leverage.”

The purported comments from Trump were in reference to the same trip from Juncker that produced the aforementioned trade truce with Europe.

It is unlikely that Trump will accept a compromise with China that is as short on details as that “deal” reached with Juncker in July. But if the US president is intent on starting a new front in his global trade war and hopes to hold up US stock valuations, then finding an offramp from the escalating tariff battle with Beijing may be the next logical step.

As Trump continues to tout his great relationship with Xi Jinping, the same cannot be said of his rapport with counterparts in Europe.

On Trade, France makes excellent wine, but so does the U.S. The problem is that France makes it very hard for the U.S. to sell its wines into France, and charges big Tariffs, whereas the U.S. makes it easy for French wines, and charges very small Tariffs. Not fair, must change!

— Donald J. Trump (@realDonaldTrump) November 13, 2018

On Tuesday, while lashing out at French President Emmanuel Macron, who has peppered recent speeches with not-so-veiled criticisms of Trump, the US president made sure to mention trade, saying on Twitter that the relationship is “Not fair, must change!”