European Commission chief Jean-Claude Juncker heads to Washington on Wednesday (25 July) to meet with US President Donald Trump at the White House for talks aimed at averting an all-out trade war.
The pair of leaders will discuss the implementation of tariffs on EU steel and aluminium and Trump's threats to expand those measures to European car imports. However, a lot more is at stake.
The Trump administration applied tariffs of 25% on imports of steel from the EU and 10% on aluminium last month alleging that US national security is threatened. The administration in Brussels hit back with its own tariffs against US goods worth 2.8 billion euros, including iconic items like whiskey, peanut butter, and Harley Davidson motorcycles.
Tariffs, tariffs, tariffs
Now US authorities are considering imposing tariffs on European cars exported to the U.S. "If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!" Trump tweeted.
But the EU-the world’s biggest single market with 28 countries and 500 million people – sees these tariffs as an economic threat and is preparing retaliatory measures.
Cecilia Malmstrom, European commissioner responsible for trade, in an interview with Swedish newspaper Dagens Nyheter published on Wednesday (25 July), said the EU would respond to potential trade barriers for cars, putting tariffs worth $20 billion on U.S. agricultural products, machinery and high technology.
Malmstrom who will join Juncker on the trip, speaking at a conference hosted by the German Marshall Fund of the United States in Brussels last week, said the EU top official is going to Washington seeking “to de-escalate the present situation and prevent it from worsening.”
(Source: UN Comtrade Database)
On Monday, the European Commission said that Junker is heading to the US without a negotiating mandate.
“It is an opportunity to dedramatise any potential tensions on trade and to engage into an open, constructive dialogue with our American partners,” Commission spokesman Margaritis Schinas, told a news briefing.
According to the BBC, this is EU code for "Don't expect too much."
"There are no offers. This is a discussion, it is a dialogue and it is an opportunity to talk and to stay engaged in dialogue." Schinas added.
Speculation about a specific EU trade measure followed comments from Larry Kudlow, the director of President Trump's National Economic Council, who said he expected the EU to make a "significant" trade offer.
The US president, a regular critic of European Union's trade practices wrote on a post on Tweeter on Tuesday: “Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that -- and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!”
Later in the evening, he said that both sides should drop all tariffs: “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won’t!”
A list of challenges to the transatlantic relationship
But trade is just one item on the long list of challenges in the relationship between the EU and the US. There are ongoing tensions between the two powers in recent months over defence spending for the NATO alliance, the Iran nuclear deal, climate change policy and Google’s $5 billion antitrust fine among others.
Trump says EU countries, which make up the bulk of NATO’s membership, have to commit at least 4% of their annual output (GDP) to military spending.He has pulled the U.S. out of Iran nuclear deal, which the EU is trying to save. He also withdrew from the Paris climate deal a year ago, saying the accord would have cost America trillions of dollars, killed jobs, and hindered the oil, gas, coal and manufacturing industries.
The European Commissioner for Competition, Margrethe Vestager, has repeatedly fined U.S. tech giants millions and millions of euros. Last week, EU's executive arm hit Google with a 4.34 billion euro ($5 billion) antitrust fine for abusing its dominant position with mobile apps.
On Friday, Trump added a new complaint, saying American trading partners were manipulating their currencies. “China, the European Union and others have been manipulating their currencies and interest rates lower,” the US president said in a tweet. “As usual, not a level playing field...”
And the list goes on. Most analysts say that an escalation into a trade war would be harmful for both sides. We believe some common ground will be found and the two leaders will come up with a decent solution that will satisfy at least partially both economies.