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EU ready to retaliate as Trump vehicle tariff deadline nears

The EU will hit 20 billion euros of US goods if Mr Trump follows through on the vehicle threat

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Ms Malmstrom says that the EU remains open for discussions with the US, provided these are without preconditions and aim at a fair outcome.

Madrid

THE European Union is finalising a list of American goods to target with retaliatory tariffs in the event that US President Donald Trump, who is expected to make a decision by May 18, imposes levies on car imports.

"We are already preparing a list of possible items that would be on that list," EU trade chief Cecilia Malmstrom said in a Bloomberg Television interview on Monday. "The moment this is official - if this happens, I still hope it won't - then we would publish that list," she said, adding that it would "happen quite rapidly".

The US and the EU reached a political accord in July to work towards a limited trade agreement, which would put on hold the threat of tariffs on EU cars. Those duties would be based on the same national-security grounds invoked for controversial American levies on foreign steel and aluminium. The EU will hit 20 billion euros (S$31 billion) of US goods if Mr Trump follows through on the vehicle threat.

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US tariffs on European cars and vehicle parts would mark a significant escalation of transatlantic tensions because the value of EU automotive exports to the American market is about 10 times greater than that of the bloc's steel and aluminium exports combined. As a result, European retaliatory duties would target a bigger amount of US exports to Europe.

A 25 per cent US levy on foreign cars would add 10,000 euros to the sticker price of European vehicles imported into the country, according to the European Commission.

"It's a little bit unpredictable for the moment," Ms Malmstrom said, adding that as part of the July agreement the two regions wouldn't impose new tariffs on each other. "We hope the president will still stick to those words."

Speaking later at a trade conference organised by German Chancellor Angela Merkel's parliamentary caucus, Ms Malmstrom said she sees the US resorting to a "law of the jungle" approach to trade, following the country's retreat from the global stage. But there's still potential that the two sides can quickly come to terms on a limited accord focusing on industrial goods.

"If we decide to negotiate such an agreement, we can do it very quickly and it would bring mutual benefits for all of us," said Ms Malmstrom. "It would expand growth and save a lot of money on tariffs. That could then create trust for something bigger in the future."

Ms Malmstrom had in the past repeated an EU position dating back to the start of the WTO disputes over aircraft aid by saying the bloc hoped for a negotiated settlement.

"We do not want a tit-for-tat," she added. "While we need to be ready with counter-measures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the US, including in bringing an end to this longstanding dispute. The EU remains open for discussions with the US, provided these are without preconditions and aim at a fair outcome." BLOOMBERG

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