EU prepares new tariffs list of US goods

The European Union 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 per cent of the US action, according to two officials . The level of the EU’s retaliatory tariffs would probably match the US. levels, said the officials.

"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 on Thursday.

Proposals

When Commission president Jean-Claude Juncker meets Mr Trump on July 25th, 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 .

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The US is in the midst of a probe into whether car imports damage national security, which could trigger the 20 per cent tariff on autos that Trump has threatened. Washington has already hit the EU with duties on its steel and aluminum exports using the same national-security justification, which led to European levies on €2.8 billion ($3.3 billion) of American goods.

The US imported about €294 billion of cars and car parts in 2017, €58 billion euros of that originated in the EU, 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 adviser Larry Kudlow saying on Wednesday that the commission president "is bringing a very important free-trade offer".

Rules

The EU isn’t allowed under global rules to reduce its 10 per cent tariff on American cars unless it either does so for all WTO members or reaches a bilateral accord with the US that covers “substantially all” two-way trade. A plurilateral deal modeled after the Information Technology Agreement, which abolished tariffs on some IT products traded between its signatories, is allowed under WTO rules.

Plurilateral accords involve a group of like-minded countries that are typically limited to specific sectors of goods or services. The WTO permits these types of negotiations as long as the benefits are provided to all WTO members on a most-favored nation basis. It is faster and less burdensome to negotiate these accords rather than multilateral deals because they don’t require the approval of all 164 WTO members.

A plurilateral deal is one of several ideas the commission is considering, according to Ms 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.”

- Bloomberg