U.S. President Donald Trump said European leaders were coming to Washington next week to try to hammer out a deal focused largely on car tariffs.

Trump considers the EU's 10 percent tariff on cars to be unfair compared with the United States' 2.5 percent tariff, although the U.S. maintains a 25 percent tariff on pickups.

"They're going to be coming on July 25th to negotiate with us," Trump told reporters at the White House on Wednesday. "We said if we don't negotiate something fair, then we have tremendous retribution. Which we don't want to use, but we have tremendous powers," he said.

Trump cited car tariffs as "the big one" among U.S.-EU trade irritants. He has threatened to levy higher tariffs, as much as 25 percent on imported cars, and his Commerce Secretary, Wilbur Ross, is conducting a study on whether vehicle and parts imports threaten national security.

European Commission President Jean-Claude Juncker is due meet Trump on July 25 after the U.S. imposed tariffs on EU steel and aluminum and Trump's repeated threats to extend those measures to European cars.

Juncker told a news conference on Wednesday he was "upbeat and relaxed" at the prospect of next week's meeting but said the EU would not be intimidated. "We will continue to react tit-for-tat to the provocations that might be thrown at us," he said.

Juncker will outline two main negotiating proposals in the U.S., according to an official familiar with the EU’s thinking:

An offer to discuss the reduction of levies on cars and car parts among all major auto-exporting countries in a so-called plurilateral deal.

The possibility of broaching a limited free-trade agreement.

The EU isn’t allowed under global rules to reduce its 10 percent tariff on American cars unless it either does so for all WTO members or reaches a bilateral accord with the U.S. that covers “substantially all” two-way trade. A plurilateral deal modeled after the Information Technology Agreement, which abolished tariffs on some IT products traded between its signatories, is allowed under WTO rules.

Plurilateral accords involve a group of like-minded countries that are typically limited to specific sectors of goods or services. The WTO permits these types of negotiations as long as the benefits are provided to all WTO members on a most-favored nation basis. It is faster and less burdensome to negotiate these accords rather than multilateral deals because they don’t require the approval of all 164 WTO members.

EU member states are divided on the next course of action, according to a separate official. Germany, which shipped 640,000 cars to the U.S. last year, is eager to negotiate a solution with the U.S. administration.

The French are less enthusiastic and consider the new auto tariffs a foregone conclusion, according to another official. They want Juncker to approach the Trump meeting with options, but say now isn’t the time to negotiate.

“We now have to avoid escalation,” French Economy Minister Bruno Le Maire said in Paris earlier this month. “That is in the hands of the U.S. and Donald Trump. Attacking allies and breaking international laws is not the right way.”

Germany's Wirtschaftswoche magazine reported that the EU will consider introducing tariffs on U.S. coal, pharmaceuticals and chemical products if Trump imposes restrictions on European cars.

The countermeasures could be agreed on at the end of next week depending on progress made during Juncker's visit, an unnamed EU diplomat was quoted as saying in the magazine.

Wirtschaftswoche said any steps taken in response to tariffs on European cars would have to be broader than earlier, targeted countermeasures following U.S. tariffs on steel and aluminum.

By: DocMemory
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