The European Union told U.S. President Donald Trump it won't becowed by his escalating protectionist rhetoric and talk of punitivetariffs.

“Europe is prepared,” Dutch Finance Minister Wopke Hoekstra saidMonday as he headed into a meeting with his counterparts from therest of the euro area. “We are not afraid, we will stand up to thebullies,” Trade Commissioner Cecilia Malmstrom said earlier in theday.

Trump returned to the offensive over the weekend, raising theprospect of higher levies on European cars and telling supportersat a rally that the countries of the EU have banded together “toscrew the U.S. on trade.” The latest brinkmanship follows newtariffs on steel and aluminum imports that are straining atrans-Atlantic relationship already tested by disputes from climatechange to Middle East policy.

“Secretary of Commerce Wilbur Ross will be speaking withrepresentatives of the European Union about eliminating the largeTariffs and Barriers they use against the U.S.A.,” Trump tweeted onMonday. “Not fair to our farmers and manufacturers.”

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No Progress

Trump's rhetoric drew unanimous condemnation from Europeanfinance ministers gathering in Brussels. France's Bruno Le Mairesaid that he's concerned about “a trade war between the EU and theU.S.” while his Spanish counterpart Roman Escolano, making hisdebut as minister, said protectionism is always a mistake.

Malmstrom accused the Trump administration of using trade “tothreaten and intimidate” Europeans and using the issue as a“scapegoat.”

A meeting in Brussels between Malmstrom and her U.S. counterpartRobert Lighthizer on Saturday ended without a breakthrough, as theEU didn't receive assurances that it will be exempted from themetal tariffs. “If anyone starts throwing stones, it's better firstto make sure he's not living in a glass house,” European Commissionspokesman Enrico Brivio said.

The bloc says that it's a close ally of the U.S. and thereforeany import levies on national security grounds are unjustified.While no further bilateral meetings are planned at the moment,contacts are ongoing as the EU is racing against time to secure anexemption before the aluminum and steel tariffs are enacted in lessthan two weeks.

Asked to respond to Trump's accusations that the EU is imposingbarriers to U.S. automakers, Malmstrom said that “it's hard toargue on Twitter over these issues, but the European Union is avery open market.” The bloc does impose a 10 percent levy on U.S.car imports, but the U.S. charges a 25 percent levy on trucks andpickups, and up to 40 percent on some clothes, she said.

On average, the EU applies a 3 percent tariff on U.S. products,while the average tariff applied by the U.S. is 2.4 percent, theEuropean Commission said, adding that isolating cars is“cherry-picking.” The U.S. currently applies a 2.5 percent tariffon European car imports.

“We want free and open world trade because for consumers and forcitizens this is the best situation,” acting German FinanceMinister Peter Altmaier said. “That's why we—if possible—want toavoid a trade war.”

What Bloomberg Economists Say

What happens to global growth if there's a trade war? Based onBloomberg Economics' estimates, if the U.S. raises import costs by10 percent and the rest of the world retaliates, raising tariffs onU.S. exports, the cost by 2020 would be 0.5 percent of globalGDP.

To put that into perspective, that's about $470 billion—roughlythe size of Thailand's output.

—Jamie Murray and Tom Orlik,Bloomberg Economics

From: Bloomberg

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