After China, the US will ratchet up trade tensions with the EU, OECD chief economist warns

  • "I think by undermining the multi-lateral rules-based system on trade, we have just injected a massive dose of uncertainty in the world that will stay with us for a long time," Laurence Boone, chief economist at OECD, told CNBC on Friday.
  • The U.S. and China have imposed tariffs on billions of dollars' worth of one another's goods over the past year, battering financial markets and souring business and consumer sentiment.
  • Meanwhile, American and European negotiators are at loggerheads over what to include in their own prospective trade deal.

Once the U.S. and China have reached a trade deal, the world's largest economy will amplify tensions with the European Union, according to the chief economist of the Organization for Economic Co-operation and Development (OECD).

Her comments come as market participants continue to monitor the prospect of a comprehensive trade agreement between Washington and Beijing.

On Thursday, President Donald Trump said the U.S. had found common ground on some of the toughest points in trade talks, adding a deal could be agreed in the next four weeks.

Chinese President Xi Jinping reportedly echoed the optimism over a possible deal, but the White House warned some sticking points remain unresolved.

"Even once we are done with the U.S. and China, the U.S. will turn to Europe," Laurence Boone, chief economist at OECD, told CNBC's Steve Sedgwick at the Ambrosetti Workshop in Italy on Friday.

"So, I think by undermining the multi-lateral rules-based system on trade, we have just injected a massive dose of uncertainty in the world that will stay with us for a long time."

Trade tensions

The U.S. and China have imposed tariffs on billions of dollars' worth of one another's goods over the past year, battering financial markets and souring business and consumer sentiment.

The Trump administration has imposed additional tariffs on $250 billion in Chinese imports, while Beijing slapped duties on $110 billion of American goods.

A truck moves a shipping container at Qingdao Port on January 14, 2019 in Qingdao, Shandong Province of China.
VCG | Getty Images
A truck moves a shipping container at Qingdao Port on January 14, 2019 in Qingdao, Shandong Province of China.

Boone warned tensions between the U.S. and China would most likely continue well beyond an expected trade deal over the coming weeks.

She added both sides would probably not resolve key issues in their long-standing dispute, most notably intellectual property theft and forced technology transfers.

"You are not going to solve that within a couple of months, that is going to stay with us," she said.

US vs EU

Meanwhile, American and European negotiators are at loggerheads over what to include in their own prospective trade deal.

Last July, Trump and European Commission President Jean-Claude Juncker announced they had agreed the terms of a future trade pact.

But, the U.S. and EU have since publicly disagreed on whether agricultural trade barriers would be part of the trade equation.

U.S. President Donald Trump and European Commission President Jean-Claude Juncker walk to the Rose Garden of the White House to deliver a joint statement on trade July 25, 2018 in Washington. 
Win McNamee | Getty Images
U.S. President Donald Trump and European Commission President Jean-Claude Juncker walk to the Rose Garden of the White House to deliver a joint statement on trade July 25, 2018 in Washington. 

"Europe is absolutely convinced that it excludes farmers products… And the U.S. is absolutely convinced that this initial agreement to start discussion includes agricultural products," Boone said.

"So, that's not looking like a good start for the negotiations," she added.

The competing narrative between European and American trade officials marks another spat between two traditional allies, with transatlantic relations currently at their lowest point in decades.