MNI: EU Opts For Longer Wait Before Targeting U.S. Services

Serious discussion of any European Union retaliation against the U.S. services sector is effectively off the table until the middle of next month following Monday's European trade ministers' meeting in Luxembourg, officials told MNI.  

"Apart from some calls for an immediate response or at least a threat of a response against services and Big Tech taxation (supported by France and Austria), there was an overall feeling that it would mean a strong escalation that a majority warned against," one official said in an email. 

"Timewise, it means that before May 15 the issue of services as a retaliatory measure will not even be on the table," the source added, referring to the date set for the announcement of a second instalment of EU retaliation against U.S. steel tariffs.

EU officials will for the moment observe the impact of tariffs on financial markets and the wider economy, hoping that the U.S. can be persuaded to begin negotiations on a broader, strategic commercial agreement, the source said. (See MNI: EU Liberation Day Retaliation May Take Time - EU Source)

The European Commission has mooted the concept of an enhanced U.S.-EU partnership - "the Transatlantic Marketplace" - based on a "zero-for-zero" tariff offer on all industrial goods, though European sources said this was getting zero traction.

STRATEGIC PROPOSAL

EU Trade Commissioner Maros Sefcovic alluded to a strategic dimension to negotiations in comments on Monday, including coordinated approaches to reduce global overcapacity in key sectors like steel and autos as well as access to critical raw materials. 

Changes to value-added tax, digital service taxes and food standards, which have been cited by U.S. trade officials as major non-tariff barriers, remain firm red lines for Europe.  

"The talks between Sefcovic and [U.S. Commerce Secretary Howard] Lutnick and [U.S. Trade Representative Jamieson] Greer did not take anything forward. The Americans are not ready to negotiate and would like first to see what would be the retaliatory measures of the EU and other countries and whether they need to re-retaliate, like 200% on champagne and wines if bourbon is on the list now. They are betting on escalation,” the source said. 

EU diplomats are expected to vote in favour of a list of retaliatory tariffs to U.S. steel and aluminium tariffs on Wednesday. Bourbon is not likely to be included, for fear of provoking further major retaliation against the European drinks sector, officials said.

Behind the current unwillingness to engage with even quite bold European trade offers, EU officials note President Donald Trump determination for tariffs to incentivise a major relocation of manufacturing industry to the U.S.  (See MNI SOURCES: Tariffs Make ECB More Likely To Cut In April)