Trump suggests cutting all tariffs ahead of key meeting with EU

President Donald Trump said that the U.S. and the EU should drop all tariffs, barriers and subsidies, just hours before the bloc’s trade chiefs present him with proposals on Wednesday that go a long way toward that outcome in a make or break meeting at the White House.

“The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them,” Trump said in a Tuesday night tweet. “Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!”

European Commission President Jean-Claude Juncker and European Trade Commissioner Cecilia Malmstrom will signal the EU’s willingness to negotiate a bilateral trade agreement on manufactured goods, or a so-called plurilateral sectoral agreement between all major car exporters which would cut or eliminate tariffs on automobiles globally.

The overtures are a last-ditch attempt to persuade him from imposing tariffs on European car exports to the U.S., in what could deal a serious blow to the bloc’s economy.

"We are here to explain and find out how to prevent a trade war," Juncker said in an interview with German public broadcaster ZDF before the meeting, adding that he’s not overly optimistic. The EU is prepared to retaliate "immediately" if talks fail, he warned.

The commission, which manages trade relations on behalf of all 28 nations in the EU, is preparing a list of retaliatory measures on American goods worth $20 billion should the U.S. impose car tariffs, Malmstrom said. “It would be more general, like farming goods, machines, high-technology products and others,” she said in an interview with Swedish newspaper Dagens Nyheter.

Highlighting the complexity of Wednesday’s talks, hours before Trump called for the elimination of all tariffs, he had tweeted that “tariffs are the greatest.” He has also singled out the EU as a “foe” of the U.S. because of its trade surplus.

The euro and shares in European auto exporters could drop if the Washington talks result in further escalation of the U.S.-EU trade tensions, with President Trump sticking to his threat of additional tariffs on EU car exports and the EC President Junker threatening to retaliate, Credit Agricole analysts led by Valentin Marinov said in a note.

Analysts caution that worse may be yet to come. Trump’s announcement of plans to provide $12 billion in aid for U.S. farmers suffering from tariffs suggest that “Trump is preparing for the long haul,” said Martin van Vliet and Benjamin Schroeder of ING Bank in Amsterdam.

“With Trump having called the EU a ‘foe’ recently and his assertion that he was ‘playing with the bank’s money,’ any quick resolution in this high stakes stand-off would come as a surprise,” they said.