The European Union is prepared to cut tariffs on U.S. car imports as part of a broader strategy to avert a trade war with Donald Trump, according to Bernd Lange, head of the European Parliament’s trade committee.
The EU currently imposes a 10% tariff on U.S. vehicles, significantly higher than the 2.5% rate the U.S. applies to European cars. Lange suggested that the EU could lower its tariff to match the U.S. level, aiming to de-escalate trade tensions.
“We can try to have a deal before escalating costs and tariffs,” Lange told the Financial Times. The EU also plans to buy more U.S. liquefied natural gas (LNG) and military equipment as part of a broader trade package designed to address U.S. complaints about the trade imbalance.
Trump’s Threats and EU’s Trade Strategy
Trump has long accused Europe of unfair trade practices, claiming that the EU doesn’t buy enough U.S. cars or agricultural goods while exporting large quantities to the U.S. He has threatened new tariffs on European cars, which could significantly impact German automakers like BMW, Mercedes, and Volkswagen.
The European automobile industry supports the tariff reduction, fearing that retaliatory tariffs from Trump could harm European car exports to the U.S., which were worth €37.4 billion in 2022.
China and Global Trade Considerations
If the EU lowers car tariffs, it would have to apply the new rates to all WTO members, including China. However, officials argue that this wouldn’t lead to a surge in Chinese car imports, as the EU has already imposed tariffs of up to 35% on Chinese electric vehicles over alleged unfair subsidies.
BMW CEO Oliver Zipse and Mercedes-Benz boss Ola Källenius have both urged for a "grand bargain" with Trump to avoid disruptive trade policies.
EU’s Retaliatory Measures If Talks Fail
Despite the EU’s efforts to avoid a trade war, officials are preparing countermeasures if Trump moves forward with punitive tariffs. The Anti-Coercion Instrument (ACI)—created after Trump’s first presidency—would allow the EU to target major U.S. tech and financial companies, such as Meta, X (formerly Twitter), and Google.
Lange warned that the EU could suspend intellectual property rights—potentially allowing European companies to use U.S. software without paying royalties—and apply new digital taxes on U.S. streaming services like Netflix and Amazon Prime.
“Sometimes it’s important to have a gun on the table,” Lange said, emphasizing that the EU must demonstrate its economic strength to deter Trump from aggressive trade actions.
What’s Next?
The European Commission is already preparing to use the ACI for the first time, potentially targeting U.S. digital services if Trump pushes for deregulation of European markets.
EU leaders hope that a compromise deal including lower car tariffs, increased LNG imports, and military purchases will prevent an escalation. However, if Trump imposes tariffs, the EU is ready to retaliate.
With the U.S. election outcome still uncertain, European officials are closely watching whether Trump’s proposed tariffs turn into official policy, knowing that any misstep could trigger a full-scale trade war between the two economic giants.
