EU sees a path to negotiate with Trump to avoid a tariff fight
Some key trade posts in Washington are still awaiting Senate approval
THE European Union is preparing for a transatlantic trade fight, but US President Donald Trump’s decision to delay broad tariffs on Mexico and Canada this week has bolstered confidence in the bloc that it will be able to negotiate an acceptable outcome.
Trump’s reversal in the Americas has informed the strategy of the European Commission, the EU’s executive arm that’s in charge of trade matters, to prepare a proportionate response to the president’s tariff threats so as to not provoke Washington’s ire, according to a source familiar with the bloc’s thinking.
But a major hurdle in the EU’s strategy is that it has not been able to establish good contacts in the nascent US administration, said the source, who spoke on the condition of anonymity. Some key trade posts in Washington are still awaiting Senate approval.
The EU will also seek to defuse a brewing conflict with the US over steel and aluminium exports set to come to a head next month, said the source.
Trump ramped up his rhetoric aimed at the EU this week, saying that tariffs “will definitely happen”, citing a large trade deficit with the bloc. Bloomberg reported earlier that the commission has prepared extensive retaliatory lists in the event the US moves forward with the threat.
“When targeted, unfairly and arbitrarily, the European Union will respond firmly,” Commission President Ursula von der Leyen told reporters after a meeting of EU leaders in Brussels on Monday (Feb 3).
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It’s unclear what Trump wants from the EU and his ire towards Europe goes a long way back, so could be harder to clinch.
Bloomberg reported earlier that the commission prepared an offer to improve bilateral relations with the US that would include more liquefied natural gas imports, fertilisers and weapons. Other areas for potential collaboration include closer alignment on China around export controls, investment screenings and working together to tackle China’s overcapacity, particularly in the steel sector.
The commission plans to follow a playbook similar to its last trade clash with the US in 2018 and target politically sensitive constituencies in the US for tariffs, the source said. At a meeting of trade ministers in Warsaw on Tuesday, the commission shared a few ideas with member states about the retaliation package.
Trump approved tariffs of as much as 25 per cent on goods from Canada and Mexico, and after phone calls with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, suspended them for a month.
Some capitals view that reprieve as a positive signal that duties are not the end goal for Trump but part of the negotiations, the source said.
At the end of March, suspended EU tariffs on about US$3 billion of US products are set to snap back into place. This particular fight started in 2018, when the US hit nearly US$7 billion of European steel and aluminium exports with duties, citing national security concerns.
The bloc retaliated by targeting politically sensitive companies with retaliatory duties, including Harley-Davidson motorcycles and Levi Strauss & Co jeans.
The two sides agreed to a temporary truce in 2021, when the US partly removed its measures and introduced a set of tariff-rate quotas above which duties on the metals are applied, while the EU froze all of its restrictive measures. The US quotas that replaced the punitive duties will expire at the end of the year.
The EU will likely extend the suspension of those tariffs past the March deadline to avoid provoking the US administration and maintain a positive approach, the source said. BLOOMBERG
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