EU Runs Into Trump Trade Test as Bloc Seeks Metal-Tariffs Waiver

(Bloomberg) -- In scarcely more than a year, Europe has gone from working with the U.S. on a blockbuster market-opening deal to scrambling to avert a trans-Atlantic trade war.

European leaders will confront this reality -- and some of their deepest anxieties about Donald Trump’s presidency -- when they meet on Thursday to weigh future ties with their traditional top global ally.

The European Union summit in Brussels begins a day before the Trump administration is due to impose tariffs on foreign steel and aluminum, a plan that has left the EU up in arms and desperately seeking an exclusion promised to Canada, Mexico and Australia. European Trade Commissioner Cecilia Malmstrom was in Washington this week to press the EU case and signs of progress toward a waiver emerged on Wednesday as she prepared to fly home.

The bloc has signaled it has no intention of taking a U.S. hit on European metal exports worth 6.4 billion euros ($7.9 billion) lying down, vowing tit-for-tat retaliation on a range of American goods including iconic brands like Harley-Davidson Inc. motorcycles and bourbon whiskey. The EU has also threatened to complain at the World Trade Organization, arguing the import levies that Trump has justified on national-security grounds are protectionism in disguise.

“The EU is right to prepare for a fight,” said Shada Islam, director for geopolitics at the Friends of Europe think tank in Brussels. “But a global steel war is in no one’s interest. Trans-Atlantic relations, although volatile at the moment, need to be kept on an even keel and an exclusion for Europe from the tariffs would provide some relief.”

Europe is grappling with the transformation of Trump’s “America First” election manifesto into government policies. The metal-tariffs dispute follows the U.S. president’s decisions to shelve talks on a trans-Atlantic trade agreement, pull out of a landmark global pact to fight climate change and rattle the western security order by bluntly criticizing fellow members of the North Atlantic Treaty Organization.

EU Runs Into Trump Trade Test as Bloc Seeks Metal-Tariffs Waiver

The U.S. turn inward, coupled with Britain’s plan to leave the EU, has propelled the bloc to assert its authority by pressing for free-trade pacts from the Pacific Rim to Latin America, and bolstering European defense initiatives. All the while, Europe has vowed to uphold the multilateral trading system that the U.S. played a leading role in building after World War II.

European Commission Vice President Jyrki Katainen sounded an upbeat note on Wednesday about the possibility of Malmstrom securing an EU exclusion from the U.S. import levies of 25 percent on steel and 10 percent on aluminum.

“There have been some positive signs,” Katainen told reporters in Brussels. “The U.S. administration and Malmstrom are trying to concretize what kind of cooperation we could do in order to give an exemption.”

While the duties are based on probes stemming from a Cold War-era American law, Trump ditched the national-security argument when he linked exemptions for Canada and Mexico to their willingness to refashion the 1994 North American Free Trade Agreement.

Similarly, even as it urges Europe to help prod China toward more free-market policies, the administration was said to be tying a waiver for the EU to its willingness to limit steel and aluminum exports to the U.S. to last year’s levels -- the kind of managed trade the bloc generally eschews. And Trump has thrown EU car exports to the U.S. into the mix.

Possible Delay

U.S. Trade Representative Robert Lighthizer said on Wednesday the government could delay imposing the metal tariffs on some countries while negotiations take place on a more permanent exclusion, and that he’s aiming to have waiver deliberations wrapped up by the end of April.

Robert Zoellick, a former U.S. trade representative, said the Trump administration has shown little respect for the multilateral order underpinned by the WTO and views international commerce in terms of individual deals involving national muscle-flexing.

“These guys are playing hardball,” Zoellick told a Brussels conference earlier this month. “It fits into the whole notion that they don’t really see the systemic aspects of this. They see it as transactional. They see it as case by case. Clearly that’s how President Trump operates.”

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