Crunch talks in D.C.

EU’s Juncker ready to tussle with Trump on auto tariffs

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Preparing for a good old-fashioned Looney Tunes strangle. Source: DPA

For all of Donald Trump’s evident dislike of the European Union, it’s not often that a US president invites senior EU officials to the White House. The last such meeting took place seven years ago when Barack Obama hosted EU Commission President José Manuel Barroso and Council President Herman Van Rompuy.

One-on-one meetings are even rarer. The last time that honor was granted to an EU Commission president was when Ronald Reagan hosted Gaston Thorn of Luxembourg, back in 1983.

When Mr. Trump meets Mr. Juncker in the Oval Office today, they’ll be alone initially and even without interpreters, said sources close to the Commission. Other officials will later join them, including Trade Commissioner Cecilia Malmström and the US Secretary of Commerce, Wilbur Ross.

The meeting could go either way. A bitter confrontation cannot be ruled out, especially since both sides turned up the heat ahead of the meeting.

Talking tariffs

“Tariffs are the greatest!” Mr. Trump tweeted Tuesday morning, well aware that the EU wants to avoid a trade war. Meanwhile, the Europeans poured oil on the fire by fining Google a record €4.3 billion ($5.02 billion) last week. The fine itself has nothing to do with the trade dispute or Mr. Trump’s threats to impose tariffs on EU vehicles, but the timing does.

Mr. Juncker wanted to give a European show of strength ahead of the meeting, said sources in Brussels, adding that unfortunately, that’s the only language that Mr. Trump understands.

The former prime minister of Luxembourg has no intention of backing down in Washington. The EU Commission already ruled out making official offers to cut tariffs or negotiate new trade agreements.

Any concessions will depend on Mr. Trump’s behavior, officials in Brussels said. If the US president resorts to the brusque accusations he hurled at fellow leaders during the G7 summit in June, Mr. Juncker won’t show any readiness to compromise.

25 p7 Trade relations between the EU and the US-01

TTIP light, Mr. Trump?

In theory, the very best to be expected of the meeting is that it clears the air and provides a ray of light towards new trade talks. Mr. Juncker and Ms. Malmström want to sound out whether Mr. Trump is even interested in averting a trade war and seek a negotiated agreement for bilateral and global trade.

This includes raising the possibility of a bilateral US-European trade deal, a light version of the Transatlantic Trade and Investment Partnership (TTIP) that was shelved in late 2016. Another option is a reduction in tariffs for the entire auto industry and for global trading partners.

But it’s doubtful whether the complicated negotiations required for a TTIP light would satisfy Mr. Trump’s thirst for quick results. Plus, many EU governments are not especially interested in reviving the TTIP talks, which were highly controversial in Europe with many opponents worried a deal would undermine consumer rights. And without a mandate from EU member states, Mr. Juncker doesn’t have the power to offer trade talks

25 p7 Trade relations between the EU and the US 2-01

The EU doesn’t have its hopes up that the Washington meeting will yield any détente and is already preparing countermeasures if Mr. Trump carries out his threat to impose tariffs on EU cars. These tariffs would hit German automakers especially hard: Every thirteenth car sold in the US comes from a German manufacturer.

The EU response would be similar to its reaction to the US tariffs slapped on European steel and aluminum in June: a complaint to the World Trade Organization and higher tariffs on US imports that would likely include goods like photocopiers, suitcases and coal.

The threat of tariffs on EU cars

The US Department of Commerce, meanwhile, is reviewing whether to levy import tariffs on autos and auto parts, and if so, how high they should be. Lobbyists expect the outcome of the review to be announced any day, with many fearful the decision has already been made.

“Auto tariffs will become reality sooner rather than later,” said Ann Wilson, vice president of the Motor & Equipment Manufacturers Association, which represents some 1,000 components makers including the US operations of Bosch and Continental.

Ms. Wilson was among 40 auto industry delegates invited to the Department of Commerce last week. They tried to change the US administration’s mind by warning of higher prices, lower revenues and job losses in production, supply and dealerships.

But few believe the the White House will heed those dire warnings. Trade expert Chad Brown of the think tank Peterson Institute said Mr. Trump is addicted to tariffs. The institute estimates that auto tariffs could destroy 195,000 jobs in the US.

Pessimism is widespread across the industry. Business federations and experts, whether liberal or conservative, are predicting major setbacks for the auto sector. With a tariff of 25 percent the US auto industry would sell 1 million fewer vehicles a year, said the American Automotive Policy Council which represents Ford, Chrysler and GM.

What is going to stop Mr. Trump if these horrendous numbers don’t? Few seriously expect Mr. Juncker will.

Ruth Berschens is Handelsblatt’s bureau chief in Brussels. Till Hoppe is a correspondent for Handelsblatt based in Brussels. Annett Meiritz is a US correspondent for Handelsblatt in Washington. To contact the authors: berschens@handelsblatt.com, hoppe@handelsblatt.com and meiritz@handelsblatt.com.

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