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Editorial

US and EU heading for trade war?

The United States could soon be in open conflict with two key trading partners -- the European Union and China. EU trade commissioner Cecilia Malmström met US Commerce Secretary Wilbur Ross last week in a bid to avoid US tariffs on steel and aluminium imports that are scheduled to take effect soon. But there appears to be little hope of an agreement. "Hopefully it will be a positive agenda...with no tariffs or quotas, but realistically I do not think we can hope for that," Malmström told European Parliament. The metal tariffs threaten €6.4 billion ($7.4 billion) worth of European exports and the bloc has promised swift retaliation if it is not exempted from the trade penalties. The European Union updated a list of American products earlier this month that would be hit with 25 per cent tariffs if the United States moved forward. It includes US motorcycles, denim, cigarettes, cranberry juice, and peanut butter.
The trading relationship between the two sides is worth more than $1 trillion annually. The EU exports significantly more goods to the US than the other way around, though their trade in services is fairly even. The EU-US talks come just one day after the Trump administration's surprise announcement that it would impose tariffs on about $50 billion worth of Chinese goods and restrict Chinese investment in the United States. The shock move followed intensive negotiations between both sides and an agreement to put a hold on threatened tariffs while talks progressed. The American Chamber of Commerce to the European Union, which represents US companies in the region, called on the Trump administration to show restraint. "These [US] tariff proposals could ignite a dangerous escalation in trade disputes and could also have other unintended consequences. They could have significant implications for jobs, growth and security on both sides of the Atlantic," it said in a statement. The European Union said it would respond in a "proportionate" way in order to avoid a trade war. But President Donald Trump may not see it that way. Trump had previously threatened to respond to any new EU trade barriers with a tax on vehicles made by European carmakers. Ross has already launched an investigation into whether global automobile imports are hurting US national security. Relations between the United States and European Union have also been strained over Iran. European businesses were recently burned by Trump's decision to reimpose wide-reaching sanctions on Iran, forcing some to wind down their operations in the country. The move affected billions of dollars worth of business deals. The United States has to scale down its threats and the consequences that are to follow. Dealing with allies is different.

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