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The EU Has a New Plan to Head Off a Automobile Trade War With Trump

July 4, 2018, 10:49 AM UTC

The European Union is considering going straight to the source and negotiating with individual automakers to avoid a trade war with the United States, diplomats told the Financial Times.

The European Commission is looking at options for direct talks with carmakers in the U.S., South Korea and Japan to negotiate reduced tariffs on specific products in a so-called “plurilateral agreement.”

Here’s how it would work: Rather than including the entire membership of the World Trade Organization in the deal—which is the standard for a multilateral agreement—just a few participating countries would agree on a “plurilateral” deal for market access. In other words, it would create a kind of private club for lower tariffs on auto imports. President Donald Trump has made it clear he prefers one-on-one negotiations to multilateral negotiations, however.

Trump threatened last month to impose duties of 20% on cars coming from Europe. The EU in turn has threatened to impose tariffs on up to $300 billion in goods coming from the US if the plan moves forward.

Conceding to Trump’s threats is not an option, the diplomats told the FT. But any solution has to benefit all EU member countries, not just heavyweights in the auto section, like Germany.