By Jan Strupczewski
WARSAW (Reuters) – With higher U.S. tariffs postponed by 90 days, European Union finance ministers will brainstorm on Friday how to use that time to get a trade deal with Washington and how to coordinate their efforts to handle higher tariffs if they do not.
U.S. President Donald Trump suspended on Wednesday for 90 days the reciprocal tariffs of 20% he imposed on Europe on April 2, though a 10% rate is in place as it is with most other countries globally. He also said he expected Europe to buy more U.S. oil and gas as part of the rebalancing of the trade relationship.
“The fact that we will have 90 days respite is, quite frankly, very helpful, because this means that we can now strategise and we’ll have 90 days to prepare ourselves in case there is no trade to deal with the Americans,” said one senior EU official involved in preparing the ministerial talks.
Negotiations with Washington on how to avoid higher tariffs altogether are handled by the European Commission, which is in charge of trade policy for the whole 27-nation EU.
If there is a deal with the U.S. on trade within the next three months, possibly along the lines of the EU’s zero-tariff proposal on all industrial goods, the problem would be solved.
But a no-deal outcome is also possible, which would leave the response in the hands of the 27 EU governments that will have to help the industrial sectors hit hardest. The most affected industries are steel, aluminium, cars, timber and pharmaceuticals. U.S. tariffs of 25% are already in place on steel, aluminium and cars.
The European Central Bank and the European Commission estimate the impact of the U.S. tariffs on the EU economy would be substantial and total 0.5% to 1.0% of GDP. Given the EU economy as a whole is forecast to grow 0.9% this year, according to the ECB, the U.S. tariffs could put the EU in recession.
Coordination of industry support will be key because some governments have stronger public finances and can afford to help their companies while others cannot. Such inequality would distort fair competition in the single EU market.
“Ministers will share their view as to how one could react at the national level, but then the idea is to coordinate, because we wouldn’t like to see a race to flood national markets with money in an uncoordinated way,” the official said on condition of anonymity.
“Not every member state has the same fiscal space. So that’s why we have this discussion on national reactions and the coordination of our national responses in a way that would not be harmful to the single market,” the official added.
The EU’s single market of 450 million consumers is one of the biggest assets the bloc has in any trade disputes, but to make it really effective, the EU must reduce the regulatory constraints that effectively act as tariffs.
The International Monetary Fund estimates intra-EU trade barriers are equivalent to a 44% tariff on goods and a 110% tariff on services. EU ministers are likely to focus on reducing these obstacles to EU trade as a key response to U.S. tariffs.
(Reporting by Jan Strupczewski; Editing by Jamie Freed)
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