President Trump considers auto tariffs as EU refuses to engage on agriculture.

On January 16, U.S. Senate Finance Committee Chair Chuck Grassley (R-IA) said President Trump is “inclined” to impose tariffs on imported cars in order to pressure the EU to move forward with FTA negotiations.  President Trump’s position to not impose additional tariffs on EU autos and auto parts has been contingent on progress on the trade talks.

On January 11, USTR published the United States’ negotiating objectives for the U.S.-EU FTA, which included securing “comprehensive market access for U.S. agricultural goods” in its list of objectives.  EU Trade Commissioner Malmström’s draft negotiating mandate from the EU Member States does not include agriculture and she has said EU will not participate in any FTA scoping exercises if the United States tries to cover agriculture in this agreement.

With the publication of negotiating objectives, FTA talks could begin as early as February 10.  However, if the EU will not engage on agriculture, that may increase the risk President Trump will approve Section 232 national security tariffs on imported automobiles and auto parts (February 2019 is the nominal deadline for such a decision, although the government shutdown may provide the pre-text to delay its release) to increase pressure on the EU to include agriculture in the trade talks.