Europe Will Punch Back Against Any U.S. Car Tariff: EU Trade Commissioner

It’s been a trade-heavy week. Earlier, the White House decided to postpone any major tariff decisions following a discussion with the Commerce Department over a draft report on the impact of auto imports, giving trade representatives from the United States and European Union room to talk.

Unfortunately, things don’t appear to have gone swimmingly. European Trade Commissioner Cecilia Malmström left her Wednesday meeting with U.S. Trade Representative Robert Lighthizer promising that the EU would have retaliatory tariffs at the ready if America pulls the trigger on auto import duties. However, she also said some progress was made during her talk with Lighthizer, but had nothing conclusive to announce

Negotiating with the EU has grown difficult and, frankly, the automotive aspects have become less important of late. The European Union is now discussing the possibility of creating its own army, leaving president Trump to tweet angrily about historical precedents.

“Emmanuel Macron suggests building its own army to protect Europe against the U.S., China and Russia,” Trump wrote earlier this week. “But it was Germany in World Wars One & Two — How did that work out for France? They were starting to learn German in Paris before the U.S. came along. Pay for NATO or not!”

While German expansionism was indeed a major theme of the 20th century, the leadership of France and Germany are both open to the idea of building an army this time around. Take away from that what you will — just know that it’s creating additional tensions that aren’t likely to simplify trade negotiations. Nigel Farage, a British Member of the European Parliament and leading advocate for Brexit, is currently trying to encourage free trade deal between the UK and the rest of Europe, without much success. He also recently claimed the EU’s recent actions have “ launched a new Cold War against America.”

Long story short, relations between the EU and U.S. aren’t particularly good.

It’s too difficult to pin down exactly when things started going sour, but the United States’ steel and aluminum tariffs were an important milestone in 2018. The EU responded immediately with new duties on American products like jeans, bourbon, and motorcycles. In June, the countries agreed not to impose any new tariffs on each other as they worked toward a free-trade solution. That sounds good, and it’s been endorsed by several of Europe’s leading politicians, but all that’s really come of it is a standoff hung upon a loose agreement.

Malmström said Wednesday she doesn’t expect any new tariffs coming from either side, but also claimed the EU has “not received any assurances” that the Trump administration won’t still implement auto tariffs. Presumably, Trump’s summer meeting with Jean-Claude Juncker, President of the European Commission, didn’t hold sufficient weight, as no formal agreement was penned.

However, in August Malmström said the European bloc would be willing to remove all tariffs on cars and other industrial products as part of a limited trade deal with the United States, if the United States does the same. Perhaps this problem can still be solved in a way that’s beneficial to all parties if everyone keeps that suggestion in mind. But we’ve noted before that the clock is ticking and the United States appears less interested in waiting around.

Last month, U.S. Commerce Secretary Wilbur Ross said as much following a meeting in Brussels. He complained that the EU needed to show things were progressing and mentioned that the two nations really only have until the spring to hammer out a trade deal before the U.S. has to make a final decision on tariffs. Unfortunately, the U.S. is supposed to wait until 2019 before it can consider trade debates official. As well, the EU has to gain approval from 28 member states. It’s a lot to ask for on a very limited timeline.

“It could be cars, it could be agriculture, it could be industrial products — it could be everything. And we will do that, but hope we don’t have to get to that situation,” Malmström said of the EU’s potential tariffs.

It looks like we’ll either end up with a more fluid automotive exchange with Europe in 2019, likely abolishing all tariffs, or a situation where we tariff each other into oblivion and vehicle prices rise just about everywhere.