The European Union is exploring a broader set of possible counter-measures against the United States as prospects for an acceptable trade agreement with Washington fade, according to EU diplomats.
An increasing number of EU members, including Germany, are now considering using wide-ranging “anti-coercion” measures which would let the bloc target US services and other sectors in the absence of a deal, diplomats say.
The European Commission, which negotiates trade agreements on behalf of the 27-member bloc, had appeared on course for an agreement in which the EU would still have faced a 10% US tariff on most of its exports, with some concessions.
Hopes now seem dashed after US President Donald Trump’s threat to impose a 30% tariff by 1 August, which follows talks between EU Trade Commissioner Maroš Šefčovič and US counterparts in Washington last week.
Mr Šefčovič, who has said a 30% tariff would “practically prohibit” transatlantic trade, delivered a sobering report on the current state of play to EU envoys on Friday, diplomats told Reuters.
Maroš Šefčovič said reaching a deal remained the priority
US counterparts had come up with diverging solutions, including a baseline rate that could be well above 10%, the EU diplomats added.
“Each interlocutor seemed to have different ideas. No one can tell what would actually fly with Trump,” one diplomat said.
Prospects of easing or removing 50% US tariffs on steel and aluminium and 25% on cars and car parts appear limited.
‘Nuclear option’
The US has also rejected the EU’s demand for a “standstill” arrangement, whereby no further tariffs would be imposed after a deal is struck.
The rationale, according to diplomats, is that Mr Trump’s hands cannot be tied on national security, the basis of Section 232 trade investigations into pharmaceuticals, semiconductors and timber.
Accordingly, the mood has pivoted among EU countries, EU diplomats have said, and they are more ready to react, even though a negotiated solution is their preferred option.
The EU has one package of tariffs on €21bn of US goods that is currently suspended until 6 August. The bloc must still decide on a further set of counter measures on €72bn of US exports.
Discussions have also increased on using the EU’s wide-ranging “anti-coercion” instrument (ACI) that allows the bloc to retaliate against third countries that put economic pressure on member states to change their policies.
Brought in more with China in mind, it would allow the bloc to target US services, limit US companies’ access to public procurement or financial services markets or restrict US investment.
France has consistently advocated for using the ACI, but others have baulked at what some see as a nuclear option.
Mr Trump has warned that he will retaliate if other countries take action against the United States.
European Commission President Ursula von der Leyen said the ACI was created for extraordinary situations, adding: “we are not there yet.”
The commission would need a qualified majority of 15 countries making up 65% of the EU population to invoke it.
It would not do so unless it was confident of passing it, but there are now growing signs of support building, with Germany among the countries saying it should be considered, EU diplomats have said.
