EU-US Truce in jeopardy

Tensions between the old and the new continent were again on displTensions between the old and the new continent were again on display at the Munich security conference, where VP Mike Pence was given a cold welcome by the Europeans. Trade talks V2 have kicked off after July 2018’s first attempt, which resulted in a fragile no-tariff truce between EU and US.

Staring contest

The EU repeated its intentions not to impose tariffs, as long as the US would keep trade free and equal. The behind-the-scenes of the staring contest however reveals the EU’s plans to retaliate hard in case Trump decides otherwise; a 20 billion Euro package of tariffs is ready to be implemented.

Auto industry

Especially Germany’s Angela Merkel defends the car manufacturing industry, stating that EU car makers are not a threat for the US OEMs. She repeated that many European OEMs produce in the US and contribute to local economies. Nevertheless, the likes of BMW and Mercedes have started to shift production to countries outside of the US to secure a no-tariff trade with China, which complicates the EU-US conversation.

Agriculture

The ultimate goal for the US is to include agricultural trade into the automotive trade discussion. It’s clear that Trump is using the highly visible and profitable car business as leverage to open the path for American produce to enter the EU. The EU considers this topic out of scope, potentially triggering Trump’s green light for tariffs on European cars and car parts up to 25%.

Negotiations

The trade talks will kick off soon, and ammunition is being prepared: the US Commerce Department has already cleared the way for import tariffs and Trump’s comments were clear: "If we don’t make the deal we’ll do the tariffs.”