With Brussels and Washington locking horns over trade tariff disagreements, their representatives’ Paris meeting on Wednesday was nothing short of being tense as the two global economic powerhouses refused to budge.
The European Union’s top trade negotiator, Maros Sefcovic, met with his American counterpart, US Trade Representative Jamieson Greer, on the sidelines of a meeting of the Organisation for Economic Cooperation and Development.
Although Sefcovic sounded upbeat when he posted on social media platform X about “advancing in the right direction at pace – and staying in close contact to maintain momentum”, alongside a picture of him shaking hands with Greer, it is unlikely that the two countries reach a substantiative trade agreement just yet.
The tense tariff spat is fuelled by US President Donald Trump’s claims that America’s persistent trade deficit with the EU – recorded at $161 billion last year, according to the US Commerce Department – is the result of “unfair trade practices”. The President often criticises the EU’s 10 per cent tax on imported cars. He raised it to 25 per cent in April.
The EU, in its defence, has argued its purchases of US services, especially in the technology sector, all but overcome the deficit.
Last week, the Trump administration overnight doubled tariffs on steel and aluminium from 25 per cent to 50 per cent to protect domestic producers. This is in addition to the “reciprocal” US tariffs of 50 per cent on EU goods that are set to kick in July 9 if the trade deal talks fall through.
The EU, on Monday, said it is preparing “countermeasures” against the US. “We still have a few weeks to have this discussion and negotiation,” French trade minister Laurent Saint-Martin said in Paris on Wednesday ahead of the OECD meeting. “If the discussion and negotiation do not succeed, Europe is capable of having countermeasures on American products and services as well.”
An olive branch has been offered by the EU in the form of a “zero for zero” deal in which both sides end tariffs on industrial goods, including autos. Although Trump rejected the idea, EU officials say it’s still on the table.
While the EU could buy more liquefied natural gas and defence items from the US, and lower duties on cars, it isn’t likely to budge on calls to scrap the value added tax, which is akin to a sales tax, or open up the EU to American beef.
Greta Peisch, who was general counsel for the US trade representative in the Biden administration, said the zero-for-zero proposal could provide a way to make progress if the Trump administration “is looking for a reason not to impose tariffs on the EU”.
But Peisch, now a partner at the Wiley Rein law firm, wondered: “How motivated is the US to come to a deal with the EU?” Trump, after all, has longstanding grievances complaints about EU trade practices, the value-added tax being the target of his ire.
Trump and his advisers consider VATs unfair protectionism because they are levied on US products. But VATs are set at a national level, not by the EU, and apply to domestic and imported products alike, so they have not traditionally been considered a trade barrier. There is little chance governments will overhaul their tax systems to appease Trump.
Likewise, the Europeans are likely to balk at US demands to scrap food and safety regulations that Washington views as trade barriers. These include bans on hormone-raised beef, chlorinated chicken and genetically modified foods.
“When you start talking about chickens or GMOs or automobile safety standards, you’re talking about the ways countries choose to regulate their economies,” Reinsch said. “We think that’s protectionist. They think it’s keeping their citizens healthy... It’s been a sore point for 60 years.”
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