EU prepares retaliatory tariffs on $20 billion of U.S. goods

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By Johan Ahlander and Paul Carrel

STOCKHOLM/BERLIN (Reuters) – The European Commission is drawing up a list of $20 billion of U.S. goods to hit with duties if Washington imposes tariffs on imported cars, European Union trade commissioner Cecilia Malmstrom said on the eve of her boss’s meeting with U.S. President Donald Trump.

Malmstrom is in Washington for talks on trade, with European Commission President Jean-Claude Juncker due on Wednesday to meet Trump in a bid to stop the United States from extending its import tariffs on EU steel and aluminum to cars and car parts.

“We hope that it doesn’t come to that and that we can find a solution. If not, the EU Commission is preparing a rather long list of many American goods. It would be around $20 billion,” Malmstrom told Swedish newspaper Dagens Nyheter on Wednesday.

In response to the U.S. metals tariffs, the EU has already imposed its own import duties on 2.8 billion euros ($3.3 billion) worth of U.S. goods, including products like bourbon and motorcycles that are made in some of the electoral districts that supported Trump.

Malmstrom said the next potential round of EU tariffs would not target specific U.S. states.

“No, now it’s more general goods such as agricultural products, machinery, high-tech products and other things,” she said.

The Commission briefed EU countries last week on the bloc’s possible response, saying in theory it could hit 9 billion euros of U.S. goods, according to EU sources.

However, some EU diplomats said the Commission was also looking at going for double that amount – to the level Malmstrom is suggesting – at half the duty rate.

A formal proposal would only come after the U.S. Commerce Department completed its investigation into whether car imports threaten national security. The report’s deadline is February 2019, but it is now expected by late August/early September.

MODERATED OPTIMISM

The European Commission, which handles trade policy on behalf of the EU’s 28 members, has insisted that Juncker is seeking to open a dialogue with Trump, rather than to negotiate.

EU officials have also downplayed the idea that Juncker is arriving with a novel trade offer.

EU budget commissioner Guenther Oettinger suggested the EU would be ready to discuss mutual tariff cuts provided the Washington lifts punitive metals tariffs first.

He told broadcaster Deutschlandfunk that the two could try to forge a lighter version of the planned U.S.-European trade deal known as the Transatlantic Trade and Investment Partnership (TTIP). TTIP negotiations were stalled after Trump’s 2016 election victory.

Business confidence in Oettinger’s homeland, Germany, the largest EU exporter of cars to the United States, weakened in July, with the threat of a trade war increasing uncertainty.

Trump on Tuesday tweeted that the EU was coming to negotiate a trade deal.

“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!” Trump wrote.

Malmstrom indicated she was not expecting a breakthrough.

“Basically, I’m an optimistic person, but heading in to this I’m moderately optimistic. But one must always try,” she told the Swedish newspaper.

She added that she did not think the U.S. proposal to drop tariffs, barriers and subsidies was serious, pointing out that the U.S. has laws, such as the Buy American Act, protecting its industries and agricultural policies supporting its farmers.

“We tried earlier in TTIP negotiations to make the United States loosen those laws,” Malmstrom said. “It was completely impossible. They did not move a millimeter.”

(Writing by Philip Blenkinsop, editing by Larry King)