European Union officials are preparing for the worst ahead of talks with the US about the future of trade next week.
Trump and his administration are considering tariffs of as much as 20% on European automobiles imported into the US. EU officials are readying a list of retaliatory tariffs to hit the US with should the two sides fail to reach an agreement.
Senior EU officials, including European Commission president Jean Claude Juncker, are set to fly to Washington next week to discuss trade with the administration, with the aim of persuading Trump not to levy punitive tariffs on European automobiles. However, the EU is ready to hit back if he cannot be persuaded.
“The aim of President Juncker’s visit is to try to establish a good relation, try to see how we can de-escalate the situation and avoid it from going further and see if there is a forum where we can discuss these issues,” Cecilia Malmstrom, the EU’s trade chief, said at a press conference on Thursday.
“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,” she added.
According to an EU source cited by Bloomberg, any retaliatory tariffs would be ready immediately.
Bloomberg also reported that President Juncker will put two separate plans on the table during the talks to try and stop any further escalation of the trade war.
The first plan is a so-called plurilateral deal, whereby tariffs on autos and auto parts will be reduced by all major auto-exporting countries. Second, Juncker will propose a “limited” free-trade agreement between the EU and US.
Trump mulls auto tariffs
The US Commerce Department is investigating auto imports, and Trump has previously threatened large tariffs on imported cars. Earlier this week, Trump said he was ready to impose a “tremendous retribution” against the EU.
“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said in a cabinet meeting.
“Including cars — cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars,” he added.
Many European automakers already have production plants in the USA. BMW and Mercedes both produce cars on large scale in the USA. Mercedes employs 4,000 people at its production plant in Alabama, while BMW’s plant in Spartanburg, South Carolina makes close to 2,000 cars per day.
Trump, however, wants more production in the USA, saying in a June tweet that companies should: “Build them here!”
Almost every major auto manufacturer, from foreign companies like Hyundai to American brands like GM and Ford, has submitted comments to the Commerce Department warning about the possible effect of tariffs on US auto workers and consumers.
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