U.S. President Donald Trump in the Cabinet Room of the White House in Washington, D.C., U.S. (Photographer: Yuri Gripas/Bloomberg)

EU Warns Trump That Car Tariffs Would Prompt Retaliation

(Bloomberg) -- European Union leaders vowed an unwavering response to President Donald Trump’s protectionism, signaling a readiness to retaliate should the U.S. escalate a trade war with tariffs on cars.

The EU government heads repeated criticism of U.S. duties on foreign metals and expressed support for the bloc’s retaliatory action over those levies, which Trump has justified on national-security grounds. The EU reacted last week by imposing tit-for-tat tariffs on 2.8 billion euros ($3.2 billion) of imports of U.S. goods ranging from motorcycles to orange juice.

The U.S. duties of 25 percent on steel and 10 percent on aluminum “cannot be justified on the grounds of national security,” the 28 leaders said in a statement on Friday at a meeting in Brussels. “The EU must respond to all actions of a clear protectionist nature.”

The global commercial order is being shaken by the Trump administration’s use of an obscure U.S. trade-law provision on national security to justify the metal tariffs against a host of countries including defense allies. The EU has also complained to the World Trade Organization, calling the duties pure protectionism masquerading as national-security policy.

Trump is threatening to deploy the same argument to impose U.S. tariffs on cars and auto parts within months, a step that would hit the EU in general and Germany in particular much harder than have the metal levies.

National Lines

Jean-Claude Juncker, president of the European Commission, the EU’s executive arm, said he has the impression “sometimes” that the U.S. government wants to divide the bloc along national lines and stressed the need for unity in Europe.

“When it comes to Europe, we have to show that we do exist, that we are united,” he told reporters on Friday after the summit. “Europe continues to stand for free trade and fair trade.”

Due to visit Trump in Washington in late July, Juncker said he would “present the European point of view” there and “I’m not sure that we will find an agreement between the U.S. and the European Union, but we’ll try.”

10 Times Greater

The value of EU automotive exports to the U.S. is about 10 times greater than that of the bloc’s steel and aluminum exports combined. That means any European retaliation over car tariffs introduced by Trump would likely target a bigger sum of American goods exported to Europe than the amount hit by last week’s European measures.

When the EU targets U.S. products with retaliatory duties, one of its goals is to make the administration in Washington pay a political price for protectionism. Earlier this week, after Harley-Davidson Inc. announced it would move some manufacturing outside the U.S. as a result of the EU’s tit-for-tat levy of 25 percent on American motorbikes, European trade chief Cecilia Malmstrom said that fit in with the bloc’s aims.

To read more on trade tensions:
  • Mnuchin Calls Report Trump Wants WTO Pullout an ‘Exaggeration’
  • Metal-Tariffs Showdown at WTO to Shake World Trade Order
  • Trade as National Security Issue? Here’s the U.S. Law: QuickTake
  • Trump Focus on Goods Ignores Trade Benefits With Europe: Chart
  • Trump’s ‘America First’ Disrupts Yet Another European Project

While pledging to stand up to Trump on trade, and amid a separate U.S. commercial dispute with China over intellectual property, the EU leaders on Friday also decided to push for improvements in the way the WTO operates. They said it’s important to uphold the global commercial order amid “growing” tensions.

The summit statement includes a list of areas where the WTO could become more effective and asks the European Commission, the EU’s executive arm, to take the lead in proposing improvements.

The commission should “propose a comprehensive approach to improving, together with like-minded partners, the functioning of the WTO in crucial areas such as more flexible negotiations, new rules that address current challenges, including in the field of industrial subsidies, intellectual property and forced technology transfers, reduction of trade costs, a new approach to development, more effective and transparent dispute settlement, including the Appellate Body, with a view to ensuring a level playing field, and strengthening the WTO as an institution, including in its transparency and surveillance function,” the EU leaders said.

©2018 Bloomberg L.P.