TMTPOST -- More and more European countries including Germany, the top economy of the European Union, are considering invoking its most-potent trade tool in case that negotiations with the United States fail to reach the acceptable agreement, according to recent reports.
Credit：China Central Television
The EU is working on a broader set of countermeasures to U.S. tariffs as an increasing EU members including Germany are now considering using Anti-Coercion Instrument (ACI) measures including those hitting U.S. services or restrict access to public tenders if no deal can be reached by the end of this month, Reuters cited EU diplomats on Monday.
It was said the EU』s trade chief Maros Sefcovic delivered a sober report on the current state of play to EU envoys last Friday following talk with U.S. counterparts who presented solutions including a baseline tariff rate that could be well above the current level 10%.
The ACI is the EU』s most powerful trade tool as it enables the European Commission to adopt a wide range of response measures in retaliation to coercive actions from U.S., such as new taxes on U.S. tech giants, targeted curbs on U.S. investments, limited access to the EU market.
The latest EU-U.S. talks came after U.S. President Donald Trump on July 13 released his letter to Ursula von der Leyen, president of the European Commission, dictating 30% tariffs on the EU exports starting August 1, dashing the EU』s hope to ease U.S. tariffs through an agreement. EU trade ministers agreed a day later that Trump』s new threat of 30% tariffs was 「absolutely unacceptable」 after a meeting in Brussels, and Sefcovic the same day said a 30% tariff would "practically prohibit" transatlantic trade.
Washington was also said to reject the EU's demand for a "standstill" arrangement, whereby no further tariffs would be imposed after a deal is struck. Without such arrangement, the Trump administration can impose more sectoral tariffs on the basis of a slew of ongoing Section 232 trade investigations into pharmaceuticals, lumber, semiconductors and other sectors.
A report from the Wall Street Journal on Sunday echoed the EU is considering countermeasures, such as curbs on U.S. digital services and acess to public procurement markets, if no deal is made. It cited sources briefed on talks last week that U.S. officials told Sefcovic that they expect Trump to demand demand further concessions from the EU to get an agreement, including a baseline tariff on most European goods that could be in the range of 15% or higher.
That expected demand was such an unwelcome surprise since the EU had been working toward an agreement that would have remained the 10% baseline tariffs. The U.S. pressure for the block to accept higher baseline tariffs and no relief for its auto tariffs forced Germany to reverse its position from more dovish to more confrontational on U.S. retaliation. Berlin last Friday hinted it could support the ACI, joining France, according to the report. More than half a dozen European capitals are in favor of the proposal for deployment of the ACI tool, led by Frence, Bloomberg reported last Wednesday.
Trump is pushing for a minimum tariff of 15% to 20% in talks with the EU, and has been unmoved by the latest EU offer to reduce car tariffs, and would stick to duties on the sector at 25%the Financial Time (FT) reported last Friday.
A bloomberg report on Monday showed the division between the U.S. and the EU. The EU has been seeking wider exemptions than the United States is offering, as well as looking to shield the bloc from future sectoral tariffs, while the U.S. is now seen pushing for a near-universal tariff on EU goods higher than 10%, with increasingly fewer exemptions limited to aviation, some medical devices and generic medicines, several spirits, and a specific set of manufacturing equipment that the U.S. needs, according to the reported.
It was reported that both sides have not yielded a decisive breakthrough despite negotiations in Washington last week, and the EU is stepping up preparations to retaliate if there is no agreement. EU envoys are reportedly set to meet as early as this week to produce a plan for possible countermeasures.
