EU to target Caterpillar, Xerox if US imposes automotive duties

Bloomberg

Caterpillar Inc. trucks, Xerox Corp. machines and Samsonite International SA luggage are among US goods that would face retaliatory European Union tariffs should President Donald Trump follow through on a threat to impose automotive duties against the bloc, according to a senior EU official.
The person commented on the condition of anonymity because the tit-for-tat list drawn up by the European Commission, the EU’s executive arm in Brussels, is still a confidential draft.
The EU’s warning of targeted duties reflects its two-pronged approach to Trump’s “America First” agenda. The 28-nation bloc is working in parallel towards a limited trans-Atlantic commercial accord in a bid to keep at bay new US levies on cars and auto parts.
“Should there be tariffs on car and car parts, which we don’t want, we have started internally to prepare a list of re-balancing measures,” EU Trade Commissioner Cecilia Malmstrom told reporters in Bucharest after a meeting of the bloc’s commerce ministers. “There is full support to do this.”
The commission said last month the EU would hit 20 billion euros ($22.7 billion) of US products should Trump impose duties on European automotive goods on the same national-security grounds that he invoked last year to tax foreign steel and aluminum.
In response to Trump’s metal levies, the EU imposed tit-for-tat retaliation on 2.8 billion euros of imports of a range of US products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co jeans. The commission has declined to disclose any American products that would be subject to EU duties prompted by any US auto levies.
Caterpillar, which announced earnings last month, had its biggest profit miss in a decade on worries over trade tensions. The Deerfield, Illinois-based company generated about 22 percent of its 2018 revenue from Europe, Africa and the Middle East, according to data compiled by Bloomberg. Shares of Caterpillar traded down 0.4 percent at 3:30 in London, while Xerox was up 0.4 percent.
Caterpillar “competes best in a free-trade environment” and is “hopeful that the government leaders can work toward a positive outcome for all parties,” spokeswoman Corrie Scott said in an emailed statement.
Lynne Berard, president for Samsonite’s North American division, didn’t immediately respond to a voicemail seeking comment.
Europe is following through on a political accord reached at the White House seven months ago between Trump and commission President Jean-Claude Juncker to work towards reducing trans-Atlantic market barriers including industrial tariffs. The pact last July put on hold the threat of US auto-import curbs.
A 25 percent US levy on foreign cars would add 10,000 euros to the sticker price of European vehicles imported into the country, according to the commission.
Malmstrom stressed a readiness to work speedily toward a trade deal by saying it could be achieved before year-end, and that she expects EU governments to give her the go-ahead in March to start formal negotiations with the US A final agreement with the Trump administration could be reached before the commission’s term ends on October 31, she said. “I think it can be done during this mandate,” she said. “We’re not delaying anything.”
With EU exports of cars and auto parts to the US valued at 58 billion euros in 2017, the bloc as a whole and Germany in particular are very jittery about the possibility of those shipments being targeted by Trump.
“There is something at stake for a lot of employees in the whole of Europe,” Austrian Economy Minister Margarete Schramboeck said in the Romanian capital.
“With US President Donald Trump mulling higher auto tariffs, the risk to Europe isn’t the dollar impact — which would be relatively small. It’s the timing — coming as growth is already weak, and the targeting — with a stumbling Germany set to face the biggest shock. Based on our calculations, US auto tariffs would put about $30 billion of European GDP at risk. With the bulk of that coming from Germany, German growth already fragile, and markets fearing a sharper slowdown, a $30 billion blow could have an outsize impact,” said Maeva Cousin, Bloomberg Economics.