Welcome to Thoughts on the market. I'm Michael Zezes, Heather Public Policy and Municipal Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and

financial markets.

It's Wednesday, January 15th at 9 a.m. Newsfin.

In 2019, the hot geopolitical issue is the U.S. trade policy.

In 2020, will we have trade peace? We wouldn't count on it and the

relationship between the US and EU could be a key reason why. Let's first consider why a flare-up in US-EU

trade tensions might surprise some people.

Unlike with China, there isn't bipartisan support for challenging the EU.

Senators on both sides of the aisle have noted their concern with the administration's

approach to the EU, as shown in draft legislation that could take back the President's

Section 232 Tariff Power.

Also, the US administration led a key November deadline and in Section 232 auto-tariff power

expire, despite the EU failing to engage in the broad

trade negotiation that the US requested in order to avoid these tariffs.

So one could argue this reveals the US's true preference is to not engage in the tariff dispute with the EU.

But we think there's more reason for concern than comfort. First, that November deadline I just mentioned,

it's a bit of a red herring. The president could quickly and easily get back the tariff authority by requesting a new Commerce Department study.

Second, it's not clear to us that the Senate would preemptively block the President's tariff actions,

particularly when it's controlled by Republicans who may not see it in their interests to oppose a

president from the same party. Finally, achieving a phase one deal with China

may have reinforced the US administration's view that tariffs are a good

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