EU Deal May Cover Cars, Return to Duty-Free Spirits, Wine, Beer and Aerospace
The head of the trade committee in the EU parliament said one of the sticking points in the negotiations with the U.S. is whether 50% tariffs on steel and 25% tariffs on cars and car parts continue to be collected as the two parties move from an agreement in principle to a detailed agreement.
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Bernd Lange, who held a press conference on July 9 in Brussels, said the 10% tariffs affect 70% of EU products, but the bigger concern for European firms is the sectoral tariffs on steel, aluminum, cars, copper and pharmaceuticals.
"These sectoral tariffs are really hurting us," said Lange, a German politician. He noted that the top exports from the EU to the U.S. are automotive, machinery and pharmaceuticals.
Lange, who is briefed by European Commission negotiators, said, "I see that there might be a corridor for some understandings on steel, on cars, and of course, also regarding some possible exceptions from the baseline tariffs."
He said those exceptions would cover aerospace parts and commercial aircraft -- the U.K. also got that exemption -- and alcoholic beverages. American spirits and wines and aerospace goods faced no tariffs in Europe before wine and spirits became retaliation targets in response to the initial imposition of U.S. steel and aluminum tariffs in 2018.
Lang said the EU wants the sectoral tariffs lowered during "the time we are negotiating the details," but the U.S. has not agreed to that "so far."
The EU also wants a "standstill clause," so that if the U.S. agrees to de-escalating its tariffs, it won't hike tariffs in coming months. The U.S. also has resisted this idea, he said.
"This is more or less the state of play," Lange said. "We would like to have an understanding quite soon."
On July 14, an initial round of tariff hikes on U.S. exports is set to start, in response to the return of steel and aluminum tariffs on EU goods. (The previous administration had moved to a tariff rate quota system for the metals while the two sides talked about how to coordinate responses to other countries' overcapacity and polluting practices.)
Lange noted that President Donald Trump said a day earlier at the White House that the EU is now "being very nice. This perhaps means he is willing to go for an agreement."
Commerce Secretary Howard Lutnick, on CNBC July 8, said that the U.S. is frustrated that the EU has price controls on pharmaceuticals, and they block the sale of U.S. cars. (The EU does not block the sale of U.S. cars, but does import far fewer U.S.-built vehicles than Americans buy European-made cars.)
Lutnick said negotiations were going nowhere until Trump threatened 50% tariffs on the bloc. "And then they started making us real offers. The European Union, to their credit, has now made significant, real offers, meaning we’re going to take down our barriers, we’re going to open our markets to American farmers, ranchers, fishermen, really open their markets, and let Americans, finally American entrepreneurial spirit, finally get to sell to Europe."
Lutnick said Trump is thinking about the offer, but he called it "very tricky, because they have a huge trade deficit."
Lange said if the two sides don't agree, the EU has more ways to bring pressure than just hiking tariffs on U.S. goods. He noted that, in addition to taxing U.S. services, the EU could restrict its exports of steel scrap, needed for U.S. steel mills.
He said, "This is not really a friendly exercise," and said the letters Trump has been posting are not diplomatic. "This is really the speech of power and not the speech of partnership."