US President-elect Donald Trump. Picture: REUTERS
US President-elect Donald Trump. Picture: REUTERS

Brussels — The EU will on Wednesday set out plans to strike back against US President Donald Trump’s threatened steel and aluminium tariffs, with flagship US products such as jeans, motorbikes and whiskey in the crosshairs.

No firm decision is expected as Trump has yet to sign into effect his plan to set tariffs to protect US car makers from what he calls unfair competition, but French President Emmanuel Macron has demanded the EU be ready to act swiftly if he does.

European commission chief Jean-Claude Juncker on Friday threatened to hit big-name US brands such as Harley Davidson motorbikes, Levi’s jeans and bourbon whiskey with import duties.

This prompted Trump to fire back a threat to tax cars from the EU, further fuelling the fear of a full-on transatlantic trade war erupting.

“We are looking at possibilities to retaliate, meaning that we will also put taxes or tariffs on US imports to the European Union,” EU trade commissioner Cecilia Malmstroem told the BBC on Monday.

Despite Juncker’s headline-grabbing threat to iconic US brands, the hit list the EU is working on does not mention specific businesses, using instead the dry language of customs regulations.

Malmstrom said the EU was also looking at “safeguard” measures to protect its industry — restricting the bloc’s imports of steel and aluminium to stop foreign supplies flooding the European market, which is allowed under World Trade Organisation (WTO) rules.

In response to the issue, International Monetary Fund (IMF) MD Christine Lagarde said there were no winners in a trade war.

“The macroeconomic impact would be serious, not only if the US took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe, and Germany in particular,” Lagarde said on French radio RTL.

“In a so-called trade war, driven by reciprocal increases of import tariffs, nobody wins, one generally finds losers on both sides,” Lagarde said, adding that she hoped that Trump would not implement the tariffs threat.

“We recommend an agreement between the different parties, and talks, talks,” she said.

Trump, elected on a promise to roll back the effects of globalisation on the US economy with an “America First” platform, said last Thursday that he planned to impose 25% tariffs on steel imports and 10% on aluminium. Juncker, who on Wednesday met Lakshmi Mittal, the boss of the world’s top steelmaker ArcelorMittal, said last week that the EU would “react firmly” to protect European industry.

Europe exports about à5bn worth of steel and à1bn worth of aluminium to the US each year, and the commission estimates Trump’s tariffs could cost about à2.8bn.

As well as making it harder for European metal to find buyers in the US, tariffs could also mean other foreign producers redirect their output to the EU, pushing the market there down.

The first option envisaged by Brussels consists of “rebalancing” measures to compensate the value of the damage suffered, which it says would be in line with WTO rules.

This would mean taxing certain specific US products to send a political message to Trump — possibly targeting businesses located in states favourable to the president. It would take about three months for these measures to come into effect.

Brussels wants to maximise the political impact of its reprisals on the US while minimising the impact of a trade war on European consumers.

European commission vice-president Jyrki Katainen said on Friday that the bloc could form a “coalition of like-minded countries” to file a complaint at the WTO, although this procedure usually takes about two years.

Katainen said he understood the US tariffs were more aimed at China, the world’s biggest producer, which has flooded the globe with cheap steel, than the EU.

“We don’t talk about it enough but overcapacity in the steel sector is largely due to China,” the senior EU official said.

Lagarde indicated that Trump might have a case for threatening to slap tariffs on some imports, saying there were a few good reasons to protest against the current situation.

“There are some countries in the world that do not necessarily respect the World Trade Organisation agreements, and which impose technology transfers. China is a case in point but it is not the only country with such practices,” she said.

AFP, Reuters