The EU is left facing a dilemma as US president Donald Trump announces new tariffs on car imports, which breach the terms of the outline trade deal reached last year. Late on Friday, Trump posted on social media that he would impose a 25 per cent tariff on EU car imports at an unspecified time this week, accusing the European side of not complying with the deal. Companies who produced cars in the US would be spared, he said.
The proposed 25 per cent tariff would be a breach of the trade agreement between the two sides, which limits US tariffs on EU goods to 15 per cent. So far, the EU reaction has been generally restrained. No doubt it will first wait to see whether Trump actually goes ahead with the tariffs – over the past year many similar threats have not been followed through on.
If Trump does proceed, the EU/US trade deal will be in some danger. Already Trump has complained about the slowness of the EU side in implementing its terms. Meanwhile. conditions put on the agreement by the European Parliament will also have been noted in Washington. The wider backdrop of transatlantic tensions over the war in Iran are also a factor.
The EU could not stand by and let the US break the deal without responding, This might, in turn, lead to further retaliation from Washington. It is hard to believe that the US president would want a full scale trade war in the run up to the midterm elections, though as ever his tactics remain entirely unpredictable.
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The risk of new trade tensions is an unwelcome addition to an already uncertain economic outlook for the EU. It is, however, not entirely surprising with tensions, too, on the EU side evidenced by the recent departure from her role of the European Commission’s senior trade official, Sabine Weyand.
Despite the destructive nature of his trade agenda – including for the US – Trump seems determined to plough on regardless. The EU will wait to see his next move but has to stand ready to react.
