Fighting on two fronts? US and EU try to avert trade war

The United States could soon be in open conflict with two key trading partners: The European Union and China.E...

Posted: May 30, 2018 3:13 PM
Updated: May 30, 2018 3:13 PM

The United States could soon be in open conflict with two key trading partners: The European Union and China.

EU trade commissioner Cecilia Malmstr-m is meeting Trump administration officials Wilbur Ross and Robert Lighthizer on Wednesday in a bid to avoid US tariffs on steel and aluminum imports that are scheduled to take effect on Friday.

But both sides appear to hold little hope of reaching agreement during the talks in Paris.

"Hopefully it will be a positive agenda ... with no tariffs or quotas, but realistically I do not think we can hope for that," Malmstr-m told the European Parliament on Tuesday.

Ross, meanwhile, said on Wednesday that the United States has "a lot to complain about" when it comes to trade with Europe.

Related: The global steel industry by the numbers

The metal tariffs threaten -6.4 billion ($7.4 billion) worth of European exports, and the bloc has promised swift retaliation if it is not exempted from the trade penalties.

The European Union updated a list of American products earlier this month that would be hit with 25% tariffs if the United States moved forward. It includes US motorcycles, denim, cigarettes, cranberry juice and peanut butter.

The EU-US talks come just one day after the Trump administration's surprise announcement that it would impose tariffs on about $50 billion worth of Chinese goods and restrict Chinese investment in the United States.

The shock move followed intensive negotiations between both sides, and an agreement to put a hold on threatened tariffs while talks progressed.

Related: China says it's ready to fight back after US revives tariffs

Experts said it's exceedingly difficult to forecast the outcome of the US-EU talks.

"The way the United States has dealt with trade policy, it's so difficult to predict what will happen," said Ross Denton, a trade expert and partner at law firm Baker McKenzie.

Denton said the European Union has a strong case for exemptions from the steel and aluminum tariffs, which were imposed in the name of national security. But the Trump administration may not agree.

"I don't see any particular benefit to the Trump administration to, frankly, pissing the European Union off," Denton said.

Related: Why are US cranberries repeatedly threatened with tariffs?

The American Chamber of Commerce to the European Union -- which represents US companies in the region -- called on the Trump administration to show restraint.

"These [US] tariff proposals could ignite a dangerous escalation in trade disputes and could also have other unintended consequences. They could have significant implications for jobs, growth and security on both sides of the Atlantic," it said in a statement.

The European Union said it would respond in a "proportionate" way in order to avoid a trade war. But President Donald Trump may not see it that way.

Trump had previously threatened to respond to any new EU trade barriers with a tax on vehicles made by European carmakers.

Ross has already launched an investigation into whether global automobile imports are hurting US national security. The administration used this same approach before announcing the steel and aluminum tariffs.

A tariff on cars and auto parts would have a damaging impact on American drivers and global automakers.

Related: Trump's on-again, off-again strategy on China may backfire

Relations between the United States and European Union have also been strained over Iran.

European businesses were recently burned by Trump's decision to reimpose wide-reaching sanctions on Iran, forcing some to wind down their operations in the country. The move affected billions of dollars worth of business deals.

The European Union reacted by introducing measures designed to defy the US sanctions and protect the interests of its businesses.

-- Alice McCool and Chris Liakos contributed reporting.

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