European shares fall on fears of car trade wars

The European Commission is drawing up a list of $20bn (€17bn) of US goods to hit with duties if Washington imposes tariffs on imported cars, EU trade commissioner Cecilia Malmstrom said on the eve of her boss’s meeting with US president Donald Trump.

Cecilia Malmstrom.

Malmstrom is in Washington for talks on trade, with European Commission president Jean-Claude Juncker to meet Trump in a bid to stop the US from extending its import tariffs on EU steel and aluminium to cars and car parts.

“We hope 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 $20bn,” she told Swedish newspaper Dagens Nyheter. Shares in Europe fell on fears of an escalation in the trade dispute with the US, involving EU car imports.

The head of the World Trade Organisation said trade policy tensions, recently escalated by new US import tariffs that spurred retaliatory measures from trading partners, could threaten global economic growth. “We’re seeing more trade restrictive measures than before. That’s clearly the situation. We hope that we can stop this trend,” said WTO director-general Roberto Azevedo in a CNBC interview.

“The growth of the global economy is showing signs of recovery. Our hope is that these new trade tensions will not affect that and will not take away the opportunities of this growth that is looking promising right now,” he said.

In response to the US metals tariffs, the EU has already imposed its own import duties on €2.8bn worth of US 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 US states. “No, now it’s more general goods such as agricultural products, machinery, hi-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 €9bn worth of US 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 US 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 or early September. The commission, which handles trade policy on behalf of the EU’s 28 members, has said 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 Washington lifts punitive metals tariffs first.

“An apprehensive day for financial markets has seen significant selling throughout European stocks ahead of a key US-EU meeting,” said IG analyst Joshua Mahony.

“The big bone of contention is going to be the automotive sector, with rumours of a 25% tariff being imposed by Trump on almost $200bn worth of automobile imports later this year,” he said.

-Reuters. Additional reporting Irish Examiner

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