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EU Prepares Retaliatory Measures Against US Tariffs on Cars and Car Parts

In some of the latest news concerning the EU’s trade tussle with the US, it has come to light that the European Commission is drawing up a list of rebalancing measures against potential US tariffs on cars and car parts. These measures would be the EU’s response to the 20% tariff on cars being threatened by US President Donald Trump.

The preparation of such measures was confirmed by European Commissioner for Trade, Cecilia Malmstroem, on 19 July 2018. The European Commission is currently preparing a new list of US goods that it could target as a means of retaliation, if the US were to introduce tariffs on cars and car parts. These measures would then be ready for immediate application.

It is rumoured that the level of measures would be adopted so as to match US levels, and possibly be worth 10 billion euros of US goods.

European Commission President Jean-Claude Juncker was scheduled to meet with US President Donald Trump in Washington towards the end of July. He is expected to discuss the issue, aim to reduce trade tensions and persuade the US not to raise duties on car imports.

Two possible solutions are mentioned:

  • the reduction of levies in a so-called plurilateral agreement between all major automotive exporting nations;
  • or a limited free trade agreement.

A plurilateral agreement is allowed under WTO rules and is typically limited to specific sectors of goods and services.

The US already imposed tariffs on EU steel and aluminium on 1 June 2018. As a consequence of this, the EU has imposed its own import tariffs on 2.8 billion euros worth of US products ranging from bourbon to motor-bikes.

EU steel and aluminium exports to the US are said to be worth about 6.4 billion euros per year. Since EU car and car part exports are reportedly worth 51 billion euros, corresponding retaliatory measures for cars would be far higher than the measures that the EU has already put in place.

This latest course of action is controversial among EU Member States. Germany, a great exporter of cars, is eager to see a solution, while France considers the tariffs as inevitable and does not consider the moment suitable for negotiations.

European Commissioner for Economic and Financial Affairs Pierre Moscovici is concerned about an escalation of the situation, which might seriously harm the economy of all parties.

Content provided by Picture: HKTDC Research
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