EU Trade Commissioner Said US Meeting Covered Cars, Non-Tariff Barriers

Sefcovic, who took over as trade minister in December, spoke with reporters at the EU Embassy in Washington Feb. 20.

President Donald Trump, who has repeatedly complained that EU consumers don't buy American cars or farm products, has said that a reciprocal tariff approach is more than just getting Europeans to match U.S. tariff rates -- such as the 2.5% tariff on cars.

He said that the level of tariffs can be set to address non-tariff barriers, like sanitary and phytosanitary rules that keep American food out of the market, and to counteract the value-added tax, which he said is just like a tariff. The VAT is a national sales tax, and is paid by European buyers of both imported and domestic goods.

Sefcovic said, "I would say that the priority -- which was highlighted several times in our conversation -- was to work on cars, how to lower the tariffs, eventually even eliminate them." He said they also talked about mutual recognition for safety standards for vehicles.

The auto sector was covered extensively in the four-hour meeting, the trade minister said. He said it's true that the EU has a 10% tariff on cars, "but the U.S. is protecting the pick-up" with a 25% tariff, "so I think that on this, if you are looking for reciprocity, so it must work for both."

He said the EU is open to lowering "the import duties for all industrial products, because I think this would be to the benefit of businesses and people on both sides of the Atlantic."

Sefcovic said that EU exports to the U.S. pay 1.4% tariffs on average, and U.S. exports to the EU pay 0.9%, and that he got the impression that the Americans would be willing to lower some tariffs in a reciprocal tariff negotiation.

He said he was not able to resolve the Americans' concerns over what Trump and some of his advisers say is the trade impact of the VAT, which can be rebated when products are exported. He said it's not discriminatory against imports -- all buyers of products pay it.

He said the VAT was also "a very high priority" for the Americans.

"I would say the top objective, as it was presented to us yesterday by our American partners, is reciprocity," and while tariffs were a focus, he said, "we also covered the issue of non-tariff barriers. Here the U.S. has the list of grievances, but I also handed over our list of grievances where we simply couldn't resolve some of the issues for years."

Sefcovic was asked about the trade deficit, and he downplayed its significance, though the entire reciprocal tariff effort is predicated on the idea that goods trade deficits are the result of unfair trade practices by the exporting countries.

He argued that while the EU exports about 150 billion euros more in goods than it buys from the U.S., the "quite significant surplus" in services is on the U.S. side, as Europeans spend about 100 billion euros more on tuition, tourism, and financial and professional services from U.S. firms than American consumers do on European services, "so it's kind of balancing each other out."

He said an annual 50 billion euro surplus is only 3% of total two-way trade, "so it's not something which we cannot overcome," and he said it could be resolved "relatively quickly." He also said the EU needs to buy more LNG, and might buy more U.S. soybeans.

While it's not known when reciprocal tariffs might come, the EU is about to see higher tariffs on its steel and aluminum exports on March 12. The EU is not a major aluminum exporter, but for a few years, a certain quantity of its steel has been able to avoid the Section 232 25% tariffs through a tariff rate quota arrangement. That is scheduled to end next month.

He said that Europe is "flooded" by imported steel from non-market economies, and that the U.S., instead of putting tariffs on low volumes of specialty steel it needs from Europe, should work with Europe "to tackle the real problem." He said that the EU is part of the solution to non-market overcapacity in steel.

He said he argued to the Trump administration officials that the March 12 move on steel and aluminum from the EU should be postponed so that the EU doesn't have to impose countermeasures, since that would be contrary to closing the trade deficit, lowering tariffs, reducing non-tariff barriers and confronting non-market excess capacity.

They "will reflect on it," he said.

He said he hopes the EU can move fast, "because I really would like to avoid the pain of measures and countermeasures.”

"I think we will both be thinking how to keep the momentum going on, and hopefully avoid pain."

But, he said, if EU products are hit with tariffs, "we have to react."

The same day Sefcovic met with his American counterparts, over in Brussels, Leopoldo Rubinacci, the EU deputy director-general for trade, told the European Parliament that if the EU is hit with unfair tariffs by the U.S., it will institute countermeasures immediately.

“What do we mean by immediately? Very fast,” Rubinacci said.

The EU imposed 25% tariffs on U.S. spirits, motorcycles and other goods when Section 232 tariffs were imposed during the first Trump administration; it suspended those duties, but imposed a March 31 deadline to bring them back at 50% if the U.S. didn't lift the TRQ regime and go back to open trade in steel.

When asked by International Trade Today if its March 31 deadline to reimpose tariffs on U.S. spirits, motorcycles and other products is going to be extended if negotiations are continuing, Sefcovic said that tariffs on both sides don't resolve the problems. In the end, the sides have to negotiate.

"Our number one priority is to avoid this period of pain," he said. "I do not want to speculate about the date, about the volume, about the value" of a retaliation list.