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The new Director General of Trade for the European Commission has warned that the United States would face retaliation if it applies further tariffs on cars and other goods. Sabine Weyand was quoted by Reuters as telling a Center for Strategic and International Studies event, "It is natural that friends sometimes disagree with each other, but this is something else. There are real threats elsewhere, yet we find ourselves in a morale-sucking, growth-slowing series of skirmishes. We have to overcome this." She said, "We will not negotiate under WTO [World Trade Organization] illegal action. Nor will we go down the road of managed trade." Weyand said that should the further tariffs that have been threatened are applied, it would be a "lose-lose" situation for all involved.

Significance: Negotiators for Europe and the US have been meeting since a truce was reached between European Commission President Jean-Claude Juncker and US President Donald Trump around a year ago, and it appears that some progress is being made. According to Weyand, this includes setting standards and conformity assessments for trade, and on liquefied natural gas (LNG) shipments. However, little progress has been made on bigger issues related to industrial tariffs. This includes the threat by the US to apply a 25% tariff on passenger cars imported from the European Union (EU) and is one of the levers being used by President Trump to bring about talks in the first place. The US has also warned that tariffs could be applied during discussions if progress takes place too slowly. the EU has unveiled its plans for a wider free-trade deal with the US that would cut tariffs on a wide range of industrial goods including passenger cars. However, it continues to block agricultural products, which the US has been pushing to include. Even so, President Trump has yet to act on the recent Section 232 investigation.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.