(Bloomberg) -- The European Union is prepared to hit 20 billion euros ($22.7 billion) of U.S. goods with tariffs should President Donald Trump follow through on a threat to impose duties on EU cars and auto parts, said a senior trade official for the bloc.
The assertion by Jean-Luc Demarty, director general for trade in the European Commission, the EU’s executive arm, highlights the risk of a sudden escalation in trans-Atlantic commercial tensions following a truce struck six months ago.
“We shall continue to face a U.S. administration that is content to threaten trade measures even against close allies and partners and, in general, to disrupt the status quo in pursuit of its goals,” Demarty told a European Parliament committee on Wednesday in Brussels. “We should stay calm.”
Europe is bracing for more possible U.S. curbs on imports while seeking to show progress in enacting a political accord reached at the White House in July to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” Last week, the commission unveiled a blueprint for a free-trade deal with the U.S. that would cut tariffs on a wide range of industrial goods including cars.
The July 25 pact between Trump and commission President Jean-Claude Juncker put on hold the threat of U.S. tariffs on EU cars and auto parts that would be based on the same national-security grounds invoked for controversial American levies on foreign steel and aluminum. A U.S. probe of automotive imports is due to be completed in February.
The metal duties as high as 25 percent prompted tit-for-tat retaliation by the EU last year on 2.8 billion euros of imports of a range of U.S. products including Harley-Davidson Inc (NYSE:HOG). motorcycles, Levi Strauss & Co. jeans and bourbon whiskey, with the bloc reserving the right to target a further 3.6 billion euros of American goods by late March 2021.
U.S. tariffs on European cars and auto parts would mark a significant escalation of trans-Atlantic tensions because the value of EU automotive exports to the American market is about 10 times greater than that of the bloc’s steel and aluminum exports combined. As a result, European retaliatory duties would target a bigger amount of U.S. exports to Europe.
A 25 percent U.S. levy on foreign cars would add 10,000 euros to the sticker price of European vehicles imported into the country, according to the commission.
“We should be ready to respond appropriately and effectively to any new trade restrictions that the U.S. administration may create for us,” Demarty said. “We have prepared a draft list of imports from the U.S. to the value of 20 billion euros on which re-balancing action could be taken.”
He said the 28-nation EU should reject any plan by the Trump administration for either tariffs or quotas on European automotive goods based on national-security grounds. Last year, the bloc rejected a U.S. demand for caps on European metal exports to the American market.
“If the administration issues a report in the next few weeks proposing import duties or quotas on European cars and car parts, we should be clear that we are not interested in any managed trade solution and that we will react if we are hit,” Demarty said.