US tariffs on European goods threaten to shake up the world’s largest 2-way trade relationship

FRANKFURT Germany AP America s largest exchange partner the European Union is among the entities awaiting word Monday on whether U S President Donald Trump will impose punishing tariffs on their goods a move economists have warned would have repercussions for companies and consumers on both sides of the Atlantic Trump imposed a import tax on all EU-made products in early April as part of a set of tariffs targeting countries with which the United States has a bargain imbalance Hours after the nation-specific duties took effect he put them on hold until July at a standard rate of to quiet financial markets and allow time for negotiations Expressing displeasure the EU s stance in commerce talks however the president reported he would jack up the tariff rate for European exports to A rate that high could make everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals much more expensive in the U S The EU whose member nations operate as a single economic bloc mentioned its leaders hoped to strike a deal with the Trump administration Without one the EU declared it was prepared to retaliate with tariffs on hundreds of American products ranging from beef and auto parts to beer and Boeing airplanes Here are major things to know about commerce between the United States and the European Union US-EU exchange is enormous A lot of money is at stake in the transaction talks The EU s executive commission describes the exchange between the U S and the EU as the the greater part vital commercial relationship in the world The value of EU-U S arrangement in goods and services amounted to trillion euros trillion in or an average of billion euros a day according to EU statistics agency Eurostat The biggest U S export to Europe is crude oil followed by pharmaceuticals aircraft automobiles and therapeutic and diagnostic equipment Europe s biggest exports to the U S are pharmaceuticals cars aircraft chemicals diagnostic instruments and wine and spirits EU sells more to the US than vice versa Trump has complained about the EU s billion-euro billion commerce surplus in goods which shows Americans buy more stuff from European businesses than the other way around However American companies fill selected of the gap by outselling the EU when it comes to services such as cloud computing movement bookings and legal and financial services The U S services surplus took the nation s exchange deficit with the EU down to billion euros billion which represents less than of overall U S -EU agreement What are the issues dividing the two sides Before Trump returned to office the U S and the EU maintained a generally cooperative transaction relationship and low tariff levels on both sides The U S rate averaged for European goods while the EU s averaged for American products But the White House has taken a much less friendly posture toward the longstanding U S ally since February Along with the fluctuating tariff rate on European goods Trump has floated the EU has been subject to his administration s tariff on steel and aluminum and a tax on imported automobiles and parts Trump administration administrators have raised a slew of issues they want to see addressed including agricultural walls such as EU soundness regulations that include bans on chlorine-washed chicken and hormone-treated beef Trump has also criticized Europe s value-added taxes which EU countries levy at the point of sale this year at rates of to But several economists see VAT as trade-neutral since they apply to domestic goods and services as well as imported ones Because national governments set the taxes through measure the EU has disclosed they aren t on the table during deal negotiations On the thorny issues of regulations consumer standards and taxes the EU and its member states cannot give much ground Holger Schmieding chief economist at Germany s Berenberg bank declared They cannot change the way they run the EU s vast internal sphere according to U S demands which are often rooted in a faulty understanding of how the EU works What are possible impacts of higher tariffs Economists and companies say higher tariffs will mean higher prices for U S consumers on imported goods Importers must decide how much of the extra tax costs to absorb through lower profits and how much to pass on to customers Mercedes-Benz dealers in the US have commented they are holding the line on model year prices until further notice The German automaker has a partial tariff shield because it makes of the Mercedes-Benz vehicles sold in the U S in Tuscaloosa Alabama but the company stated it expects prices to undergo crucial increases in coming years Simon Hunt CEO of Italian wine and spirits producer Campari Group communicated funding analysts that prices could increase for specific products or stay the same depending what rival companies do If competitors raise prices the company might decide to hold its prices on Skyy vodka or Aperol aperitif to gain sphere share Hunt reported Trump has argued that making it more intricate for foreign companies to sell in the U S is a way to stimulate a revival of American manufacturing Countless companies have dismissed the idea or stated it would take years to yield positive economic benefits However chosen corporations have proved willing to shift several production stateside France-based luxury group LVMH whose brands include Tiffany Co Luis Vuitton Christian Dior and Moet Chandon could move specific production to the United States billionaire CEO Bernaud Arnault commented at the company s annual meeting in April Arnault who attended Trump s inauguration has urged Europe to reach a deal based on reciprocal concessions If we end up with high tariffs we will be forced to increase our U S -based production to avoid tariffs Arnault announced And if Europe fails to negotiate intelligently that will be the consequence for plenty of companies It will be the fault of Brussels if it comes to that Multiple expect Trump to drop his majority of drastic demands Several forecasts indicate the U S market system would be more at hazard if the negotiations fail Without a deal the EU would lose of its gross domestic product and U S GDP would fall if Trump slaps imported goods from Europe with tariffs of to according to a research review by Bruegel a think tank in Brussels Given the complexity of particular of the issues the two sides may arrive only at a framework deal before Wednesday s deadline That would likely leave a base tariff as well as the auto steel and aluminum tariffs in place until details of a formal transaction agreement are ironed out The the greater part likely outcome of the contract talks is that the U S will agree to deals in which it takes back its worst threats of retaliatory tariffs well beyond Schmieding disclosed However the road to get there could be rocky The U S offering exemptions for specific goods might smooth the path to a deal The EU could offer to ease chosen regulations that the White House views as bargain blockades While Trump might be able to sell such an outcome as a win for him the ultimate casualties of his protectionism would of program be mostly the U S consumers Schmieding reported Source