US-EU tariffs could cause 'snowball effect' and lead to greater unceirtainty

Trade tariffs between the EU and the US could trigger a “snowball effect” that would soon take the world into “very precarious waters”, said the head of the UN agency for workers and employers.

In an interview with CNBC, Guy Ryder, director general of the International Labour Organization (ILO), said that when world leaders threaten retaliatory measures, business owners and workers lose confidence in the benefits of trade.

“I can’t think of a time when people felt more uncertain about their futures,” said Ryder, adding that this unpredictability has “dripped into our political life, as well as our economic and social interaction.”

The comments come a three-person arbitration tribunal appointed by the WTO is expected to rule on the value of trade countermeasures that the United States can soon impose on European goods to counterbalance the unfair subsidies granted to Airbus.

Washington had already posted a list of provisional products that could face tariffs following a WTO ruling against the European jet-maker and said it would “respond immediately”.

Phil Hogan, the Irish commissioner in Brussels, insisted on Monday night that Europe will need to “stand up for itself” in the case that the WTO rules in favour of the US.

Hogan demanded updates to the WTO that could help avoid trade dispute resolutions driven by the “law of the jungle,” and promised to work toward a “positive, balanced and a more mutually beneficial partnership with the US” but made clear that it “takes two to tango.”

There is a similar WTO case being filed by the EU against US planemaker Boeing and the ruling is expected in a few months' time and could lead to tariffs on US imports to Europe.

If another trade war begins and tit-for-tat tariffs escalate it is likely that both sides will feel the damage.