MNI: Support Grows For Retaliation Against US - EU Officials

Support for European Union retaliation against U.S. tariffs is growing among member states and in the European Parliament, amid expectations that a likely trade deal by the Aug 1 deadline will disappoint the hopes of countries including France, officials told MNI.

With Germany, together with the Netherlands and Ireland, pushing strongly for a deal, officials expect to avoid the 30% tariffs threatened by U.S. President Donald Trump, but now they now see a likely baseline 15% levy, rather than the 10% they had previously hoped for. The U.S. is also likely to target France in particular with higher charges on products such as cognac and other spirits, and looks set to rebuff EU pleas for a "standstill" to rule out changes to any deal-in-principle until a later more comprehensive deal.

Washington seems to assume that German reluctance to retaliate will stop the EU from acting if necessary, officials said, adding that this calculation may prove to be inaccurate.

"I don't think there will be a way to stop retaliation if the deal goes as badly as this," one EU source close to the talks said. "The mood is shifting - radically." 

RETALIATORY MEASURES

The European Commission has suspended one set of retaliatory measures targeting US20 billion in U.S. exports of products including soybeans, orange juice, poultry, beef, steel and aluminium, as well as Harley Davidson motorbikes, and has finalised a EUR72 billion package of measures aimed at aircraft, cars and agricultural goods if needed. There is also the prospect of enacting the EU’s Anti-Coercion Instrument, which would apply charges to a wide range of U.S. services, though concerns over whether this would do excessive harm to Europe’s economy mean there is widespread reluctance to see it deployed. 

The EU hopes to negotiate exemptions for products such as cars, pharma and food, while talks for a more comprehensive deal continue past the Aug 1 deadline. These would come in return for the EU’s granting some increased market access to the U.S. in areas such as agriculture/food, public procurement, digital and technical standards. (See MNI: EU Hopes For Mini-Deals With US Despite Tariff Threat)

The Commission will continue to resist Trump's push to ease regulatory burdens on U.S. companies operating in the EU, concessions which could be hard to sell to member states and the parliament, though officials noted that it could offer sweeteners. They pointed to the recent dilution of EU climate reporting obligations and to backtracking on the digital services tax. 

"You can also change things without even saying that they are actually being negotiated. The Commission can do this kind of thing and still be able to say it resisted," an official noted.