World Economy

Trump threats are off-putting but EU could agree a US autos deal, trade body leader says

Key Points
  • The executive director of the International Trade Centre has claimed that the EU could do a deal on auto tariffs.
  • Arancha Gonzalez told CNBC the idea has merits but would meet industry opposition.
  • China and the U.S. are set to implement reciprocal trade tariffs on Friday 6 July.
US President Donald Trump

The European Union (EU) could yet do a tariff deal with the U.S auto sector, despite unhappiness at the hardball negotiating style of President Donald Trump, according to the executive director of the International Trade Centre (ITC).

"The EU is saying two things. The first thing… is we will not negotiate under a threat, we will not negotiate with a gun to our head. But the second thing the EU is saying (is) that, alright, if there is a particular sector causing difficulties to the U.S. like vehicles, let’s sit down and discuss," Arancha Gonzalez told CNBC’s Joumanna Bercetche on Wednesday.

"It is pretty much in line with what the U.S. talked about a few weeks ago in terms of a ‘zero-for-zero’ tariff deal," she added. The ITC is a subsidiary of the World Trade Organization (WTO) and the United Nations (UN).

Gonzalez said the concept of particular sectors being exempt from tariffs was first suggested by Robert Zoellick when he was the U.S. trade representative during the presidency of George W. Bush.

ITC's Gonzalez: EU won't negotiate with US holding a gun to its head

"It is a great idea, but the problem you look at trying to implement it, you will have a number of unhappy sectors. I guess that producers of trucks in the U.S. that currently enjoy the protection of a 20 percent tariff would not be very eager to surrender that protection," she said.

Gonzalez's comments come after Trump warned the World Trade Organization (WTO) on Monday that “we’ll be doing something” if the United States isn’t allowed to change the rules on tariff setting.

Some have interpreted that as a threat to leave the WTO, but Gonzalez said that was unlikely, given the decision rested with the U.S. Congress, rather than with Trump.

“You know there is a mechanism where every year the U.S. has a process to decide whether they want to pull out of the WTO. Since the WTO has been in existence, the answer in Congress has invariably been, ‘No, we want to remain a member of the family.’ I doubt this will change soon,” she said.

ITC's Gonzalez: Don't see US Congress calling for a WTO withdrawal

China's finance ministry has said it's waiting for the U.S. to make the first move before it implements tariffs on a wide range of U.S. products. Washington has said it would impose tariffs on $34 billion dollars’ worth of U.S. goods on July 6. China has promised to retaliate with equal measures on the same day.

At the same time, Beijing is reportedly pressing the EU to form an anti-U.S. pact against Trump's trade policies. According to Reuters, it has proposed an alliance between the two economies, and is ready to further open up the Chinese market to Europe in exchange. However, the idea is facing opposition from EU officials wary of teaming up with China.

A China-European summit will take place in Beijing on July 16 and 17.

A (brief) history of the world's trade wars