EU prepares to retaliate over car tariffs before Trump talks

The bloc may target goods worth about 20% of the US action

By BLOOMBERG

BRUSSELS • The European Union (EU) is preparing a new list of American goods to hit with protective measures if a mission to Washington next week fails to persuade US President Donald Trump not to raise levies on car imports.

The bloc may target American goods worth about 20% of the US action, according to two officials with knowledge of the deliberations. The level of the EU’s retaliatory tariffs would probably match the US levels, said the officials, who asked not to be identified because the preparations are private.

“If the US would impose these car tariffs that would be very unfortunate, but we are preparing together with our member states a list of rebalancing measures as well,” EU trade chief Cecilia Malmstrom said yesterday.

The retaliation actions would be ready immediately, according to a person familiar with the EU’s preparations.

When European Commission President Jean-Claude Juncker meets with Trump on July 25, he’ll bring two main negotiating proposals in an effort to tamp down the escalating trade tensions: An offer to discuss the reduction of levies on cars and car parts among all major auto-exporting countries in a so-called plurilateral deal; and the possibility of broaching a limited free-trade agreement, according to a separate official with knowledge of the EU’s thinking.

The US is in the middle of a probe into whether car imports damage national security, which could trigger the 20% tariff on autos that Trump has threatened. Washington has already hit the EU with duties on its steel and aluminium exports using the same national-security justification, which led to European levies on €2.8 billion (RM13.41 billion) of American goods.

The US imported about €294 billion of cars and car parts in 2017, €58 billion of that originated in the 28-nation bloc, according to an internal EU memo seen by Bloomberg.

The US expressed optimism that the two sides may come to an agreement, with White House Economic Advisor Larry Kudlow saying on Wednesday that the commission president “is bringing a very important free-trade offer”.

The EU isn’t allowed under global rules to reduce its 10% tariff on American cars unless it either does so for all World Trade Organisation members or reaches a bilateral accord with the US that covers “substantially all” two-way trade.

A plurilateral deal is one of several ideas the commission is considering, according to Malmstrom, who expressed scepticism that such an accord could work. “It’s one idea of many,” she said. “I don’t know if it would work at all.”

“The aim of Juncker’s visit is to try to establish a good relation, try to see how we can deescalate the situation and avoid it from going further and see if there is a forum where we can discuss these issues,” Malmstrom said in Brussels.

EU member states are divided on the next course of action, according to a separate official.

Germany, which shipped 640,000 cars to the US last year, is eager to negotiate a solution with the US administration.

The French are less enthusiastic and consider the new auto tariffs a foregone conclusion, according to another official.

They want Juncker to approach the Trump meeting with options, but said now isn’t the time to negotiate.