Chuck Grassley, the top US senator on trade policy and a close ally of Donald Trump, said the president was leaning towards slapping tariffs on automotive imports, in the hope of forcing Brussels to further open the EU market to American farm products.
In a briefing with reporters in the US Capitol on Wednesday, Mr Grassley said Europe was “very afraid” of US tariffs on cars and car part imports and they could be “the instrument that gets Europe to negotiate” on agriculture.
“I think it would not necessarily be the best thing to do but I think the president is inclined to do it,” Mr Grassley, the 85-year-old Iowa Republican who is chairman of the Senate finance committee, said in reference to car tariffs. “I’m not in favour of tariffs but they are a fact of life when Trump is in the White House — they may be an effective tool.”
Mr Grassley’s comments came ahead of a February 17 deadline for the US commerce department to publish a report on whether automotive imports constitute a threat to US national security, which could pave the way for Mr Trump to slap tariffs on the products in a big blow to both the EU and Japan.
US negotiators are pressing hard for the EU to drop its resistance to the inclusion of agriculture in trade talks that were launched after a summit in July last year between Mr Trump and Jean-Claude Juncker, president of the European Commission. They are taking that position even though the agreement reached at the time only envisaged a narrower package based on regulatory reform and lowering trade barriers related to non-auto industrial goods.
While American officials may be tempted to use the car tariffs as leverage to get the EU to make concessions, European officials have warned that automotive levies would halt the negotiations in their tracks and lead to retaliation, unless Brussels was granted an exemption. A US move to slap tariffs on cars and car parts would do great damage to EU and Japanese car manufacturers, including those that have manufacturing facilities in the US but use foreign-made components such as engines.
If Mr Trump presses ahead with tariffs after the commerce department issues its report, it may not affect all car and car parts imports. Wilbur Ross, US commerce secretary, told the Financial Times in December that all options were on the table and that Mr Trump would have a lot of “flexibility” in deciding whether and how to impose any levies.
Mr Grassley — who has recently met with both Cecilia Malmstrom, the EU trade commissioner, and Robert Lighthizer, the US trade representative — said bringing agriculture into the negotiations was essential to getting any trade deal approved by the US Congress. He said farmers and farm lobby groups were a “locomotive” that brought manufacturing and services groups along as well.
“If you want to get something done through the US Senate you almost have to have something on agriculture in it,” Mr Grassley said. “My inference to Malmstrom was: what’s the sense of negotiating if you don’t include agriculture?”
For many European politicians, however, allowing US farm products greater access to their markets is politically toxic, given powerful agricultural interests there and longstanding consumer fears about genetically modified crops and lax sanitary standards in US meat — from chicken washed with chlorine to hormone-raised beef.
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