President Donald Trump said that the U.S. and the European Union should drop all tariffs, barriers and subsidies, just hours before the bloc’s trade chiefs present him with proposals going a long way toward that outcome in a crunch meeting at the White House.
“I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!” Trump said in a Tuesday night tweet. “That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!”
European Commission President Jean-Claude Juncker and EU Trade Commissioner Cecilia Malmstrom are due to meet with Trump in Washington on Wednesday. They plan to signal the bloc’s willingness to negotiate a bilateral trade agreement on manufactured goods, or a so-called plurilateral sectoral agreement between all major car exporters which would cut or eliminate tariffs on automobiles globally.
The overtures are a last-ditch attempt to persuade him from imposing tariffs on European car exports to the U.S., in what could deal a serious blow to the 28-nation bloc’s economy.
“We are here to explain and find out how to prevent a trade war,” Juncker said in an interview with German public broadcaster ZDF before the meeting, adding that he’s not overly optimistic. The EU is prepared to retaliate “immediately” if talks fail, he warned.
July 24, 2018
The commission, which manages trade relations on behalf of all 28 nations in the EU, is preparing a list of retaliatory measures on American goods worth $20 billion should the U.S. impose car tariffs, Malmstrom said. “It would be more general, like farming goods, machines, high-technology products and others,” she said in an interview with Swedish newspaper Dagens Nyheter.
Highlighting the complexity of Wednesday’s talks, hours before Trump called for the elimination of all tariffs, he had tweeted that “tariffs are the greatest.” He has also singled out the EU as a “foe” of the U.S. because of its trade surplus, and hinted that America’s commitment to the continent’s security is contingent on resolving the spat over tariffs.
The euro and shares in European auto exporters could drop if the Washington talks result in “further escalation of the U.S.-EU trade tensions, with President Trump sticking to his threat of additional tariffs on EU car exports and the EC President Junker threatening to retaliate,” Credit Agricole analysts led by Valentin Marinov said in a note.
Analysts caution that worse may be yet to come. Trump’s announcement of plans to provide $12 billion in aid for U.S. farmers suffering from tariffs suggest that “Trump is preparing for the long haul,” said Martin van Vliet and Benjamin Schroeder of ING Bank in Amsterdam.
“With Trump having called the EU a ‘foe’ recently and his assertion that he was ‘playing with the bank’s money,’ any quick resolution in this high stakes stand-off would come as a surprise,” they said.
