Negotiations on Tariffs between the U.S. and the EU

By Jan Strupczewski

WASHINGTON (Reuters) – The United States and the European Union still need considerable effort to finalize a deal that would avoid imposing tariffs on each other’s goods, according to EU Economic Commissioner Valdis Dombrovskis.

The U.S. imposed a 25% tariff on EU cars, steel, and aluminum in March, followed by a 20% tariff on other EU goods in April. Subsequently, the U.S. reduced the 20% tariff rate by half until July 8, establishing a 90-day window for negotiations aimed at a more comprehensive tariff agreement.

In response, the EU suspended its tariffs on certain U.S. goods and proposed zero tariffs on all industrial goods exchanged between the two parties. Dombrovskis noted that the zero-tariff proposal received only moderate interest from the U.S.

> “There’s a lot of work ahead to come to more concrete parameters and elements and areas of cooperation which would allow us to avoid the implementation of tariffs,” Dombrovskis stated during the International Monetary Fund meetings in Washington.

The U.S. views the EU’s value-added tax (VAT) as a non-tariff trade barrier; however, Dombrovskis asserted that the 27-nation bloc does not perceive VAT as problematic and is unwilling to include it in trade discussions.

> “It’s not a trade barrier at all and it doesn’t belong to the conversation. The value-added tax is a consumption tax, similar to sales taxes in U.S. states,” he explained, adding that VAT is crucial for revenue for European governments and the EU budget.

Prepared to Counteract Potential Flood of Chinese Goods

Dombrovskis mentioned that due to the U.S. market being effectively closed to China after imposing a 145% tariff on all Chinese goods, he urged his Chinese counterparts in meetings not to inundate EU markets with goods redirected from the U.S.

> “They didn’t specify any concrete plans or measures they would take from their side,” Dombrovskis remarked regarding his discussions with China’s finance minister and central bank governor.

He emphasized that the EU would take protective measures if Chinese goods threaten its markets.

> “If we see some disruptions in the EU market, we will also have to take certain countermeasures to protect our market, to protect our companies, our jobs,” he said, warning of potential negative consequences for global trade.

Dombrovskis concluded that avoiding a scenario of market closures and fragmentation of the global economy is crucial for both the EU and China.