18 Jul 18

Juncker to meet Trump for 'deal' on car tariffs

Hot on the heels of Trump's visit to Europe, the EU is coming to Washington. Jean-Claude Juncker's top topic when he meets the U.S. President next week: how to disarm the ticking time bomb of U.S. tariffs on European cars. Most observers think his chances of success are slim. 

According to sources close to the team preparing the meeting, scheduled for July 25, European Commission President Juncker will propose a so-called 'plurilateral sectoral deal'. This would reduce existing car tariffs between the U.S. and the European Union, as well as with and between a number of other major car-exporting markets. 

20% tariff
The European Commission hopes that showing a willingness to tackle existing tariffs on U.S. car exports – a constant Trump complaint – will appease the President enough for him to abandon the planned 20% tariff on cars and light trucks imported from the EU into the U.S.

However, while the EU plan would be a major upset to the global automotive industry, observers fear the proposal will not be enough for Trump to change his mind. For one, it would take time to implement, and the U.S. President might thus see it merely as a delaying tactic. 

And secondly, with U.S. tariffs already in place on imports of EU steel and aluminium, the global trade war has already built up a momentum of its own. Those tariffs have already led the EU to impose levies of $3.3 (€2.8) billion on a range of U.S.-manufactured imports. 

Stoxx 600
What's different, are the industries involved. Europe's car manufacturers are a powerful lobby, and they're already feeling the pain, even before U.S. tariffs have been imposed. The Stoxx Europe 600 Automobiles & Parts Index, representing large, medium and small automotive companies from 17 European countries, has lost 9% of its overall value since the beginning of this year.

Further complicating a possible deal is the fact that Juncker represents the diverging interests of Europe's automotive industry. German automakers, who collectively shipped 640,000 vehicles to the U.S. last year, are eager for a solution. 

German Chancellor Angela Merkel voiced their viewpoint in a recent speech, when she suggested that the EU could reduce car tariffs as part of a broad free-trade agreement, which would include nearly 90% of the trade between the U.S. and the EU. Or both powers could lower duties and offer those to all other WTO partners as well, she said.

Not in favour
French OEMs on the other hand have for the main part already accepted the coming U.S. tariffs, and are not in favour of the 'plurilateral sectoral deal' Juncker will be suggesting.

Trump generally has little patience for such complexities, and on his recent European trip already branded the EU a 'foe'. It doesn't take a genius, however strong and stable, to see that the Juncker-Trump talks have little chance of success.

Authored by: Frank Jacobs