EU ready to discuss cars with Trump to avert trade war

SOFIA/BRUSSELS (Reuters) - The European Union is ready to negotiate opening its markets wider to U.S. imports including cars, in a bid to avert a potential trade war with Washington, EU leaders said on Thursday.

U.S. President Donald Trump has imposed import duties of 25 percent on steel and 10 percent on aluminium on grounds of national security but has granted EU producers an exemption until June 1 pending the outcome of talks.

EU leaders meeting at a summit in Sofia sought to find a common stance, balancing the interests of those such as Germany who are most keen to avoid a trade conflict and those including France most determined not to be bullied into concessions.

“We have a common position. We want a permanent exemption and then we are ready to talk about how we can reciprocally reduce the barriers to trade,” Merkel told reporters on Thursday.

EU diplomats say the need to find a unified stance goes beyond just tariffs. The United States has withdrawn from the Iran nuclear deal, posing a threat to European companies doing business there, and has blocked appointments to the World Trade Organization, undermining its ability to settle trade disputes.

French President Emmanuel Macron said trade and Iran were vital tests of Europe’s ability to act on its own.

“On trade, we have been very explicit. There cannot be any detailed discussions with the United States unless we first have a permanent exemption,” he said.

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EU leaders agreed on four areas on which the bloc would be willing to open talks with the United States, but only on condition that Washington grant EU steel and aluminium makers a permanent exemption from tariffs.

European Commission President Jean-Claude Juncker said Europeans would not negotiate “with the sword of Damocles hanging over our heads.”

Lithuanian President Dalia Grybauskaite said the EU leaders’ agreement had given some space for talks.

But some diplomats voiced scepticism, saying that trade discussions with Washington would be far from easy.

“We are not so sure that this administration is willing to create a win-win situation. Some member states have some real doubts on the desirability or wisdom of this process,” one EU diplomat said, adding that only export-oriented Germany was really keen on the idea.

French President Emmanuel Macron, British Prime Minister Theresa May and German Chancellor Angela Merkel walk during the EU-Western Balkans Summit in Sofia, Bulgaria, May 17, 2018. REUTERS/Stoyan Nenov

The areas identified for cooperation are market access for industrial products, including cars, and government tenders, energy, notably liquefied natural gas (LNG), possible cooperation among regulators and reform of the WTO.

Trump has railed against EU import duties on cars that are higher than U.S. duties, and he has threatened to slap on a retaliatory tax. The EU says that for other products, such as trucks, U.S. import duties are higher.

“These talks will be based on the principles of reciprocity and WTO compatibility and with the objective of avoiding a trade war,” an EU official said.

Trade ministers are expected to discuss the issue at a meeting in Brussels next Tuesday.

The European Commission, which oversees trade policy for the 28 EU members, has said it would respond to tariffs with its own duties on U.S. products, including motorcycles and whisky.

To keep this possibility open, it published a draft law on Thursday to allow it to impose 25 percent tariffs on a range of U.S. imports from June 20 and tariffs of up to 50 percent on imports from March 23, 2021.

It will notify the World Trade Organization of its potential plans by Friday.

Reporting by Philip Blenkinsop and Alastair Macdonald; Editing by Hugh Lawson