Trump reignites trade battle with Europe over digital tax

US President Donald Trump vowed on Wednesday to make good on threats to impose high tariffs on European cars if the bloc doesn’t agree to a long-delayed trade deal with Washington.

“They are more difficult to do business with than China,” Trump told reporters at the World Economic Forum (WEF) in Davos.

The US leader said that the tariffs, which would hit Germany’s car industry especially hard, could amount to 25%.

“Ultimately it will be very easy because if we can’t make a deal, we’ll have to put 25% tariffs on their cars,” Trump told Fox Business News in Davos.

German Ambassador to the US Emily Haber said the EU would respond to additional US tariffs with targeted retaliatory measures.

Trump: ‘I wanted to wait’

European Commission President Ursula von der Leyen, who met with Trump for the first time on Tuesday, said that Brussels was working to secure a deal to avoid car tariffs.

Von der Leyen told news agency DPA that the bloc hopes to have a deal “in the next few weeks.” She did not, however, mention how comprehensive the deal would be.

Trump has set his sights on the EU after striking a Phase 1 trade deal with China in January, after years of a trade war that destabilized the world economy.

“I wanted to wait till I finished China, to be honest with you. I always like to be very transparent. I wanted to wait ’til I finished China. I didn’t want to go with China and Europe at the same time,” Trump told Fox Business News.

Read more: Social entrepreneurs meet at World Economic Forum in Davos

• EU-US trade relationship

  More than a trillion euros in trade

  The European Union is the US’ largest export market, accounting for about one-fifth of all US exports. Similarly, one-fifth of EU exports go to the United States. EU-US trade in goods and services was €1,069.3 billion in 2017. The EU imported €256.2 billion in goods from the US, and exported €375.8 billion.

• EU-US trade relationship

  EU trade surplus

  The main exports and imports between the EU and US fall into the categories of machinery and vehicles, chemicals and other manufactured goods. Combined, they accounted for 89 percent of EU exports and imports with the US in 2017. In all three categories, as well as food and drink, the EU had a trade surplus. The US had a trade surplus in raw materials and energy.

• EU-US trade relationship

  Cars, machinery top exports

  At €167 billion, machinery and vehicles were the largest EU export category to the US, accounting for 44.4 percent of goods exports. The €111.5 billion in machinery and transport equipment was the largest EU import from the US, accounting for 43.6 percent of imports.

• EU-US trade relationship

  Small part of trade pie

  At the end of May 2018, the Trump administration imposed a 25 percent tariff on EU steel and 10 percent tariff on aluminum. Steel and aluminum exports to the United States were worth €3.58 billion in 2017.

• EU-US trade relationship

  Retaliatory tariffs

  In response, the European Union developed a list of products it may subject to retaliatory tariffs. These include typical American products like peanut butter, bourbon whiskey, Harley Davidson motorcycles, jeans and orange juice. The exports targeted by the EU are worth about €2.8 billion annually, according to EU officials.

• EU-US trade relationship

  Services include travel, education

  For services, the EU imports amounted to €219.3 billion and exports €218 billion. The top services were in professional and management services, intellectual property, travel and education. About a third of EU-US trade consists of intra-company transfers.

  Author: Chase Winter

Digital tax in crosshairs

Trump’s comments also came on the heels of similar threats from US Treasury Secretary Steven Mnuchin, who said the tariffs could come if European countries don’t back off from their digital tax plans.

“If people want to arbitrarily put taxes on our digital companies we will consider putting taxes arbitrarily on car companies,” Mnuchin told a WEF panel.

Under pressure from Washington, France said on Wednesday it was putting its plans for a digital tax on hold. The Trump administration previously threatened to put duties of up to 100% on French goods like handbags and wine.

The UK defended its digital tax plans, which would target US tech giants such as Google, Amazon, and Facebook, saying they are “proportionate” and “temporary.”

“We plan to go ahead with our digital services tax in April,” said the UK’s finance minister Sajid Javid.

Trade relations between the European Union and the United States deteriorated shortly after Trump took office three years ago.

A tentative truce was formed in July 2017 after Washington and Brussels agreed to pursue a trade deal, but negotiations have stalled since then over issues including farming.

rs/rc (AFP, Reuters, AP)

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