【By Observer Net, Wang Yi】The EU had thought a tariff agreement with the United States was almost within reach, but now it has been forced to prepare for potential trade wars.

The U.S. "Wall Street Journal" reported on July 20 that sources familiar with the talks revealed that U.S. officials told the EU Trade Commissioner last week that President Trump is expected to demand more concessions from the EU, including accepting a "base tariff" of 15% or higher on most European goods.

The report stunned the EU, as the EU had been working to push for an agreement to keep tariffs at 10%, which was already a difficult compromise for some EU member states. The latest developments in negotiations prompted Germany, the largest economy and largest exporter in Europe, which had previously taken a moderate stance towards American retaliation, to change its attitude and support a more confrontational position, similar to France.

Insiders said that Germany has asked the European Commission to prepare a new round of countermeasures against the U.S., including not only imposing retaliatory tariffs on American goods, but also preparing measures such as digital service taxes and restricting U.S. companies' access to the EU public procurement market.

"All options are on the table," said a German official to the newspaper on the 18th. Although there is still time to reach an agreement, he said, "if they want war, they will get what they want."

Trump sent a letter to the EU on the 12th, stating that he would raise tariffs to 30% and make them effective on August 1st, a rate higher than the initial 20% proposed in April. At the same time, the EU is also bearing the U.S. tariffs of up to 50% on steel and aluminum and 25% on cars.

Since Trump took office, the EU Commissioner for Trade and Economic Security, Šefčovič, has visited Washington six times to negotiate tariff issues with U.S. officials, and has communicated with the U.S. multiple times via phone and text. The EU once expressed willingness to reduce tariffs on the U.S. and proposed purchasing hundreds of billions of dollars worth of American energy and advanced semiconductor products in exchange, but with little effect.

American Commerce Secretary Rutnik expressed optimism about reaching an agreement with the EU. He stated on a program of the U.S. Columbia Broadcasting System (CBS), "I believe we will reach an agreement, which will be a great victory for the U.S., because the president always stands by the U.S."

Despite Rutnik's statement, insiders told the Wall Street Journal that even German officials who had long urged a quick agreement no longer believe this is the most likely outcome, especially after Šefčovič returned from the U.S. last week, and more member states have become pessimistic about the prospects, hoping the EU will take a stronger stance against the U.S.

According to a previous report by the British Financial Times, Šefčovič informed EU officials of the recent negotiation situation in the U.S. on the 18th, and two people who knew the content of the meeting said he made a pessimistic assessment.

An EU diplomat told the Wall Street Journal that although the U.S. Trade Representative Jamieson Grier insisted that it was possible to reach a 10% tariff agreement, Rutnik believed the rate should be higher.

Insiders said that Šefčovič left with the understanding that the U.S. hinted at imposing a tariff of 15% or higher. He was also told that the U.S. would maintain the current 25% tariff on the EU automotive industry, and the pharmaceutical tariff may be taxed at 100%.

Previously, only France and some countries supported a tougher stance against the U.S., while Germany and other countries favored seeking a quick temporary tariff agreement.

But the latest developments have changed Germany's attitude. A source who was aware of the situation told the Wall Street Journal that the German leadership had originally thought that Trump's threat letter of 30% tariffs was just a last-minute bargaining tactic. However, after learning last week that U.S. officials had demanded the EU accept higher tariffs without any exemptions for its economic lifeline automotive industry, they finally lost their temper and completely shifted to supporting retaliation.

German cars parked at the dock waiting to be exported to the U.S. Reuters

The paper reported that on the 18th, Germany suggested that they might support the EU using the Anti-Coercion Instrument (ACI) to deal with the U.S. This is an instrument that has never been used before, allowing the European Commission to retaliate against economic bullying through a series of trade and investment restrictions.

EU officials consider this tool to be the EU's strongest trade weapon and a last resort. EU Commission President von der Leyen said earlier this month that the tool was designed for emergencies, "and we have not reached that point yet."

U.S. media believe that with Germany's statement, this assessment may change. Insiders said that the EU Commission is drafting a series of countermeasures that can be implemented through the ACI, including taxing U.S. digital services and limiting U.S. companies' access to the EU public procurement market.

In addition, the EU has already prepared two rounds of tariff retaliation lists, covering a wide range of American goods, from peanut butter and whiskey to airplanes, with a total value exceeding $100 billion. Although these lists have not yet taken effect, they can be quickly activated when necessary.

U.S. media analysis suggests that the EU still hopes to reach an agreement with the U.S. and does not plan to launch any retaliation before the August 1st deadline. Preparing the ACI does not necessarily mean the tool will eventually be deployed, but they may be preparing for a battle that could cause heavy damage to the multibillion-dollar commercial relationship between the two sides.

According to EU data, daily two-way trade between the EU and the U.S. exceeds $5 billion. This trade relationship is the largest bilateral trade and investment relationship in the world, accounting for nearly 30% of global goods and services trade, and contributing to 43% of global GDP. Last year alone, bilateral trade amounted to 1.68 trillion euros (approximately 14 trillion yuan), equivalent to about 4.6 billion euros in daily trade.

The European Commission stated on July 20 that it still hopes to reach a mutually beneficial agreement through negotiations, but if it does not get satisfactory results, "all options are on the table."

Poland's Deputy State Secretary for Economic Development and Technology, Michał Baranowski, previously told the U.S. Consumer News and Business Channel (CNBC) that during the process of striving for an agreement, the EU is implementing a "four-pronged strategy" - sincere negotiations, preparation for countermeasures, consultations with other countries affected by U.S. tariffs, and enhancing European competitiveness comprehensively.

"All options will bring harm," said an EU diplomat to the Wall Street Journal. Now, EU member states need to decide how much more concessions they can make to reach an agreement, and what countermeasures they can take if the negotiations fail.

This article is an exclusive article by Observer Net, and it is not allowed to be reprinted without permission.

Original: https://www.toutiao.com/article/7529407558407520831/

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