EU warns it will retaliate if US imposes auto tariffs


Brussels (AFP)

The EU said Thursday it will try to defuse a transatlantic trade row next week in Washington but is drawing up a list of imports to target if the US imposes tariffs on cars.

European Union Trade Commissioner Cecilia Malmstrom said the EU would "think out of the box" in a bid to find a solution but her warning also fuelled fears of an escalating global trade war with the Washington at the centre.

"We are preparing a list of rebalancing measures," Malmstrom told a conference in Brussels, as US President Donald Trump's administration studies imposing duties on cars following its tariffs on aluminium and steel.

"Similar moves on cars would be disastrous," the Swedish commissioner said before a high-level EU mission to Washington next Wednesday.

Malmstrom will accompany European Commission chief Jean-Claude Juncker who will try to persuade Trump at talks in the White House to drop tariffs on metals and avoid duties on cars.

"Tariff measures on cars are neither wanted or warranted," Malmstrom said.

"They are at best a solution in search of a problem. At worst they are an illegal move to gain leverage in trade negotiations."

Malmstrom said Brussels has informed US officials about its efforts to prepare a new list of targeted US products, which an EU source said would be worth just under 10 billion euros ($11.5 billion).

The list would be more painful than the 2.8 billion euros worth of products -- like peanut butter, blue jeans, Harley Davidson motorcycles -- that the EU targeted in retaliation for US metal tariffs.

Trump imposed duties of 25 percent on steel imports and 10 percent on aluminium in March, but had given temporary exemptions to the EU and some other close trading partners as talks continued.

- 'Aggressive rhetoric' -

But those exemptions were lifted in early June, prompting a raft of retaliatory tariffs by the EU, and Trump is now considering whether to impose hefty levies on European vehicles.

German Chancellor Angela Merkel said last week that she would back opening talks with trading partners on lowering automobile duties, in what appeared to be an olive branch to Trump.

Germany is particularly worried about auto tariffs, a sector that employs 800,000 people.

But Washington has shown no sign of compromise as it pursues its "America First" agenda across a range of issues, even if it means alienating traditional allies.

Besides the tariffs, the US has threatened European companies with huge fines if they continue to operate in Iran, after Trump reimposed far-reaching sanctions while pulling out of the landmark 2015 deal on curbing Tehran's nuclear programme.

Earlier this month Trump implemented tariffs on $34 billion worth of Chinese imports, drawing a tit-for-tat response from Beijing.

In a bid to resolve the row, Malmstrom stressed the need to reform the World Trade Organization, which the Trump administration increasingly challenges.

She also proposed to tackle problems caused by Beijing, such as overcapacity in steel production and the forced transfer of technology when doing business in China.

But she also worried about "increasingly aggressive rhetoric" the Trump administration is using against allies.

Juncker, the former prime minister of Luxembourg, said recently that Trump had called him a "brutal killer" when the two discussed trade at the fractious G7 meeting in Canada -- but added that he was not sure if it was a compliment.