EU Would Hit Back Against Any U.S. Car Tariffs, Trade Chief Says

(Bloomberg) -- The European Union would retaliate against any U.S. decision to impose tariffs on car imports, though the bloc hopes it can avoid such a confrontation, European Trade Commissioner Cecilia Malmstrom said.

“These tariffs would be damaging, not only for the European economy but for the U.S. economy,” Malmstrom said Wednesday in Washington after meeting U.S. Trade Representative Robert Lighthizer.

The EU would complain to the World Trade Organization and slap retaliatory tariffs on U.S. products if President Donald Trump imposed barriers against European cars, she told reporters. EU tariffs would be a “re-balancing list covering a lot of different sectors,” she said, declining to identify specific U.S. goods to be targeted. “That would be ready if we thought those measures would hit us. We hope not.”

The U.S. and EU are trying to preserve a fragile truce on trade after relations came under strain from Trump’s “America First” approach to foreign policy. Trump has threatened to impose tariffs on foreign autos, and this year tasked the Commerce Department with studying whether imports threaten national security.

Trump met with his top trade advisers on Tuesday at the White House to discuss a draft of the Commerce investigation. Administration officials decided they weren’t ready to act on the tariffs for now, according to two people familiar with the matter.

Eliminating Duties

After the U.S. imposed duties on steel and aluminum imports earlier this year, the EU retaliated with tariffs on iconic U.S. products including bourbon and motorcycles. The U.S. and EU in July agreed not to impose new tariffs on each other as they work toward eliminating duties altogether. Malmstrom said Wednesday she made progress discussing trade with Lighthizer, adding there was nothing conclusive to announce.

“Talks will of course continue,” she said.

Malmstrom on Tuesday said there may be enough common ground for a limited trade agreement with the U.S. over industrial goods that excludes vehicles, agriculture and liquefied natural gas. Additionally, strengthening regulatory cooperation would probably be left out from an initial deal, she said at an event in Washington.

She repeated on Wednesday that she expects the EU to be exempted from any new U.S. car tariffs. But Trump and his aides have shown signs in recent weeks of becoming impatient with the EU and the pace of talks. U.S. Commerce Secretary Wilbur Ross grumbled after a meeting in Brussels last month that the clock was ticking and that the EU needed to demonstrate things were progressing.

The relationship also hasn’t been helped by a turn in the once-cozy relationship between Trump and Emmanuel Macron. Trump recently reacted angrily to the French president’s call for the establishment of a European military.

Both sides still need formal mandates to begin negotiations. The U.S. technically isn’t allowed to conduct formal talks before January under the congressional rules governing trade agreements. EU negotiators, meanwhile, still must obtain the go-ahead from the bloc’s 28 member states.

©2018 Bloomberg L.P.