Donald Trump arrived in Osaka for the G20 summit firing out barbs at a range of targets, including hosts Japan, India and the head of the EU’s antitrust unit, Margrethe Vestager.
But other broadsides from Washington this week, aimed at Brussels, also have implications for the world’s financial markets.
At a meeting held by the House agriculture committee on Wednesday US lawmakers lined up to tear into plans by the European Union to tighten supervision of its derivatives markets after Brexit. Brussels wants more direct oversight of clearing houses, which safeguard the financial system by acting as counterparties between sellers and buyers of shares or derivatives.
The EU’s rules are aimed at London, because the city handles the vast majority of the €450tn market for interest rate contracts, denominated in euros. But the UK capital has become a flashpoint because it handles most US dollar-denominated derivatives too. As a result, US executives and policymakers see something more sinister in the Brussels’ move.
As Terry Duffy, the abrasive head of CME Group, the Chicago futures exchange, put it at the hearing: “We are discussing a regulatory over-reach by the EU that is in direct challenge to the authority of the United States Congress and the Commodity Futures Trading Commission to set rules and to regulate the US futures market.”
US complaints about over-reach may bring a wry smile to compliance officers around the world, many of whom struggle with US-conceived rules, but there were other frank comments.
One proposal to raise fees for supervision, as part of the EU’s reform package, “is an egregiously bad infringement under US sovereignty,” said Neal Dunn, a Florida Republican. There were sharp words too for a senior EU official who recently suggested the US “fell for” a March accord between the sides.
“The EU is messing with the wrong tiger here,” snarled David Scott, committee chair.
Brussels has said it is working in good faith and that its proposals would allow local regulators to police their markets.
CFTC head Christopher Giancarlo has delivered similarly strong views to Brussels before, on its plans to expand oversight. Given the lack of action from the US so far, EU officials have tended to regard tough talk in public as Trumpian posturing, and the CFTC looking to pick a fight.
But Mr Giancarlo has tried to reset relations in the past, conceding that Obama-era rules for swaps market oversight, for example, had gone too far. The House meeting should therefore send a message to the EU that unease over its plans is felt across Washington. Mr Duffy suggested Congress could stop US investors trading German sovereign debt, if the EU were to follow through.
Calmer heads pointed out that such retaliatory moves hurt all markets. But what the EU proposals lack — two years after they were first aired — is details, especially over who should take charge of a clearing house in a crisis. Providing an answer to that question this summer could cool temperatures down — or possibly raise them further.