The European Commission’s new President, Ursula von der Leyen, has secured support from the European Parliament to lead a ‘geopolitical’ EU executive that will battle US tech companies and tackle climate change. From December 1, the former German defence minister will lead the next European Commission with her team of 26 commissioners who were approved last Wednesday. One of the most fundamental challenges she faces is how to tackle the continuing impact of US President Donald Trump’s tariffs.
Brussels recently approved of an increase in US beef imports to the EU, while criticising the Trump administration for imposing tariffs on metal imports and threatening to target EU cars and auto parts. Furthermore, MEPs urged the US President to remove duties on EU steel and aluminium.
They also called on Washington to collaborate with the EU to find a solution over subsidies to aircraft producers, which brought about the WTO’s case against Airbus and Boeing that resulted in tariffs on $7.5 billion of EU imports, including French wine, Scottish and Irish whiskies, olives and cheese from across Europe.
Last month, questions were raised over whether the President can continue using Section 232 of the Trade Expansion Act of 1962 to deploy any future tariff action. European industries, subsidies and other programmes could also be investigated by the Trump administration under Section 301 of the Trade Act of 1974 that allows for investigations into practices that restrict US commerce. Trump’s main concern with EU tariffs is that they charge a 10 percent tariff on American vehicles while the US only has a 2.5 percent import duty on passenger cars.
The EU’s approval for an increase in US beef imports is a positive step forward, but there needs to be more of a compromise between both sides. The US ambassador to the EU, Gordon Sondland, warned in August that Washington will not sign any trade pact with Brussels that excludes agricultural goods. With Trump close to achieving a trade deal with China, Japan, Canada and Mexico, he must secure one with the EU if he hopes to make trade fairer for both sides. It is also the only way von der Leyen can deal with a crisis she has inherited from her predecessor, Jean-Claude Juncker.
The problem is that no progress towards a US-EU trade agreement has been made so far. In August, Trump hinted that the US will be able to reach a fair trade deal with the EU without imposing proposed tariffs on car imports. He also said he planned on visiting Germany to discuss a trade pact with German Chancellor Angela Merkel. Merkel said herself she wants trade discussions to be be concluded ‘as quickly as possible.’
With enthusiasm among both sides for a deal, the European Commission would be wise to take advantage of this opportunity before Trump’s tariffs continue to impact upon Germany’s economy in particular. Germany narrowly avoided a recession in 2019 as its economy grew by 0.1 percent in the third quarter of this year after contracting in the previous three months.
It is in both sides’ interests to conclude this trade war as quickly as possible. Former Deputy Director of the National Economic Council, Clete Williams, told CNBC in October that US duties are likely to remain for a while considering Washington and Brussels ‘have not achieved much’ in their past trade negotiations. Trump’s tariffs will have a devastating impact upon the EU’s economy in the long-term. Ursula von der Leyen must make this matter an urgent priority, but given how slow the EU is at negotiating trade pacts in general, and the difficulty Juncker had in resolving this dispute, the signs do not look positive.