Anchal Vohra is a Brussels-based international affairs commentator. On a smog-filled day in New Delhi, I watched as a few German cars struggled to navigate a massive traffic jam. A British SUV was also in the mix, trailing not so far behind. Last year, these foreign cars accounted for only 0.1 percent of India’s imports, with Germans in the lead and the British coming in a near second. However, British businesses have gained an edge ever since the U.K. and India inked a free trade agreement earlier this year, with India finally lowering its protectionist guard. Once this deal fully comes into effect, overall bilateral business is expected to grow by more than 50 percent in about a decade-and-a-half, as New Delhi slashes its car tariffs from 100 percent to 10 percent, and its tariffs on scotch from 150 percent to 40 percent over a period of 10 years — all despite the cost to its domestic industries. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. The EU, meanwhile, remains the single largest market in the world, with a much higher chance of growing its exports to a country packed with over 1.46 billion consumers. Yet, negotiations between New Delhi and Brussels are forever hitting roadblocks, even as negotiators shuttle between the two capitals to get a deal across the finish line — a deadline that’s now been postponed to Jan. 26. And as these talks continue, the bloc could stand to learn from the flexibility of its former member. According to an Indian official in New Delhi, granted anonymity in order to speak freely, the biggest barriers to an agreement are currently the EU’s insistence on greater market access in the politically sensitive agriculture sector, and its insistence on a carbon tax under the Carbon Border Adjustment Mechanism (CBAM). On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. In contrast to this rigidity, India’s concessions in its deal with the U.K. emerged from the flexibility it was granted in the agriculture sector, which was largely insulated from British products, the official said. “For all its faults, [the U.K.] understands India and Indians better.” Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. Back in 2021, farmer protests even forced Prime Minister Narendra Modi to withdraw agricultural reforms and apologize. In fact, I have been told by former Indian officials and experts that the U.S. tariffs on India weren’t punishment for the country’s purchase of Russian oil, as Trump has claimed, but rather for its refusal to let U.S. food products flood the country. Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. | Jagadeesh Nv/EPA “The interests of our farmers are top priority. India will never compromise on the interests of its farmers, dairy farmers and fishermen,” Modi had said at the time. But these same differences now threaten the EU-India relationship before it even properly takes off. “The Europeans could learn from the British,” the Indian official noted. “They excluded dairy, chicken and apples from the deal,” he explained, listing products particularly important to India. “In exchange, we let them bring in salmon, cod and lamb.” He also alluded that India could consider dropping tariffs on cars and wine if the bloc kept out of agriculture: “In liquor, luxury cars and wine, there is always room, since that doesn’t affect our most vulnerable people.” Instead of any such changes,, however, India is now growing peeved by what it sees as last-minute pressure tactics by Brussels. Just this month, the EU decided to “limit rice imports from India” and other Asian countries to the benefit of domestic rice growers and millers. And the bloc’s unexpected decision to spike tariffs on steel imports outside its quota to up to 50 percent has rattled Indian negotiators. New Delhi was already opposed to the EU’s incoming carbon tax, believing it would make its steel exports uncompetitive. The Secretary of India’s Ministry of Steel Sandeep Poundrik described the European carbon tax as a bigger threat to Indian exports than Trump’s tariffs. On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. | Piyal Adhikary/EPA Moreover, some experts like former trade negotiator for India Sangeeta Godbole argue the EU stands to gain more from an FTA whereas India stands to lose if the carbon tax provision isn’t reconsidered. “Nearly 80 percent of Indian exports to the EU even now face miniscule tariffs below 1 percent,” she noted recently, demanding India shield exports “from excessive environmental rules” the EU is trying to impose. To that end, the country has decried the bloc’s tax on carbon intensive imports via CBAM as a violation of the Common But Differentiated Responsibilities (CBDR) principle, which doesn’t hold developing countries equally responsible for climate change due to differences in historical contributions and the state of their economic development. And here, too, India argues, the understanding with the British could be emulated. Although it failed to gain an exemption on the U.K.’s version of the carbon tax, India has reserved the right to retaliate if the FTA’s benefits are negated by this tax. For its part, the EU claims the carbon tax is intended to encourage the use of clean energy in heavy polluting industries. And as Commissioner for Trade Maroš Šefčovič said back in September: “We also need an understanding from the Indian side that we also have our constituency, we also have our audience” to consider — especially after the farmer protests over the recent deal with Mercosur nations. Meanwhile, the EU is also concerned about whether a deal with India might end up benefiting China. The bloc is desperately trying to reduce its dependence on Beijing in strategically important sectors and hoping India could replace it, but India itself is heavily reliant on China as well — for example, nearly half of the components in Indian semiconductors are imported from there. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. | Divyakant Solanki/EPA However, speaking with a highly placed EU insider who was granted anonymity, I learned the bloc is now ready to make concessions, offering to jointly manufacture cars to encourage India to lower its tariffs, to leave out access to certain agricultural products, and to possibly even relent on garment duties. And last week, negotiators went through sector by sector once more, trying to get a better deal for their domestic industries, trying to keep the balance sheet even. The truth is, India — home to a large number of people living below the poverty line despite its rapid economic growth — needs an FTA with the single largest market to attract foreign investment. But the EU needs India too.

Listen on * Spotify * Apple Music * Amazon Music Ein Kanzler im Kurztrip auf Langstrecke für den Klimaschutz. Friedrich Merz fliegt zur Klimakonferenz nach Belém in Brasilien und bleibt dort nur wenige Stunden. Mit an Bord: eine Agenda zwischen Industriepolitik, Technologieoffenheit und der Frage, ob Deutschland beim Klima überhaupt noch als Vorbild gilt. Gordon Repinski begleitet den Kanzler und ordnet die vorher Reise ein. Zurück in Berlin: Da tagt vorher der Kanzlerreise der Stahlgipfel im Kanzleramt. Tom Schmidtgen vom POLITICO-Newsletter Industrie und Handel erklärt, woran die Stahlbranche wirklich krankt, warum Zölle gegen Billigimporte drohen und weshalb selbst der Industriestrompreis nicht hilft. Im 200-Sekunden-Interview spricht Ilse Aigner, Präsidentin des Bayerischen Landtags, über den Verdacht, dass die AfD mit parlamentarischen Anfragen sensible Daten zur kritischen Infrastruktur abgreift. Sie fordert strengere Regeln und ein entschiedenes Vorgehen gegen mögliche Spionage. Zum Schluss nimmt euch Gordon mit zum Launch-Event des Newsletters Industrie und Handel. Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. Jetzt kostenlos abonnieren. Mehr von Host und POLITICO Executive Editor Gordon Repinski: Instagram: @gordon.repinski | X: @GordonRepinski.

BRUSSELS — The European Commission said Friday that it stands ready to do a deal with the U.S. on tariffs, and plans no further meetings between the two sides over the weekend. “Our priority is to achieve an agreement in principle with the U.S.,” trade spokesperson Olof Gill said at the Commission’s midday briefing. “We await some indication from our American counterparts that they are ready to do the same.” There was no indication that this would happen imminently, Gill added: “Let’s see what happens when our friends in Washington wake up in a few hours from now.” The EU has been pushing for an agreement in principle with the White House that would anchor a 10 percent U.S. baseline tariff and provide relief for industrial sectors such as aircraft and spirits. A solution on car tariffs, which stand at 25 percent, is also under discussion. Trump told NBC on Thursday evening that he would soon notify the EU of new tariffs. The EU said Thursday, meanwhile, that it doesn’t expect a letter in the style of Japan, South Korea — and, on Thursday, Canada, which the U.S. president hit with a 35 percent tariff. The European Commission was not for now planning any more meetings with U.S. counterparts for Trade Commissioner Maroš Šefčovič or Commission President Ursula von der Leyen over the weekend. Gill stressed, however, that “that can change very quickly.” The U.S. this week suddenly extended the deadline for trade partners to seal a deal, from July 9 to Aug. 1. The uncertainty over Trump’s decision brings into play the question of the EU’s first package of retaliation measures against his tariffs. The bloc’s tariffs on U.S. goods worth around €21.5 billion will kick in automatically at 12:01 a.m. on Tuesday — unless the Commission decides to extend their current suspension. Gill said this step could be taken quickly by the Commission under a so-called urgency procedure. This would only require the subsequent approval of EU countries. “Should we decide to extend the suspension — or if we need to unsuspend it — we can do that with the drop of a hat,” he explained. That timeline gives the EU’s 27 trade ministers time to discuss the state of play at a meeting in Brussels on Monday, before — if there is still no deal — deciding on any possible retaliation.

President Donald Trump said Friday he is “terminating” all trade discussions with Canada, effective immediately, citing the country’s Digital Services Tax. “We have just been informed that Canada, a very difficult Country to TRADE with … has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump said in a Truth Social post. He accused the country of copying the European Union, “which has done the same thing, and is currently under discussion with us.” Based on the Digital Services Tax he wrote, the U.S. was “hereby terminating ALL discussions” on trade with Canada. He added that he’d announce tariff levels on Canada within the next seven days. Canadian Prime Minister Mark Carney and Trump had previously agreed to secure a new economic and security deal by July 16, in which Canada was hoping Trump would lift tariffs on the country. Canada’s Digital Services Tax, which imposes a 3 percent tax on large foreign and domestic digital companies that make over C$20 million in revenue, is expected to come into force on Saturday. The tax applies to certain Canadian profits that companies make from online advertising, social media, online marketplaces and the sale and licensing of user data. The prime minister’s office didn’t immediately respond to a request for comment. But earlier this week, a Canadian official told POLITICO two meetings were scheduled with U.S. officials to discuss a deal.

BRUSSELS — After hitting just about every other industry he can think of (albeit with a brief pause), Donald Trump’s long-promised tariffs on drugs are around the corner. “We’re going to be announcing very shortly a major tariff on pharmaceuticals,” he said at a dinner of the National Republican Congressional Committee last week. “And when they hear that, they will leave China. They will leave other places because they have to sell — most of their product is sold here and they’re going to be opening up their plants all over the place.” Are they, though?  It’s true that the branded pharmaceuticals — the household names that left the U.S. for Ireland and its favorable tax regime — need a continued presence in the U.S. because it’s such a big market for pharma, and due to its “relatively short time-to-market for innovative medication,” according to analysts at ING. “Given their presence all over the globe and their higher margins, some shuffling in their supply chains as a result of tariffs is likely,” they wrote in a briefing. But will it lead to the full-scale exodus that Trump has promised? In 2024, pharmaceuticals were the EU’s largest export to the U.S., worth a reported $127 billion. “You don’t move manufacturing overnight,” said Justine Fassion, an international trade lawyer at Sidley.  “Manufacturing in the pharma industry is subject to various regulatory constraints, so it can take time before you can move production from one country to another,” she said in an interview with POLITICO earlier this year. Building a manufacturing plant from the ground up generally takes three to five years, much of it related to the local permitting process for utilities, disposal and other community concerns, according to Marta Wosińska, a senior fellow at the Brookings Institute. “What makes local permits challenging is that they can vary dramatically across locations, increasing the risk for potential delays,” she noted in a briefing. It’s also extremely costly. Recent infrastructure expansions in the United States by big-name pharmaceuticals have been led by Eli Lilly’s $23 billion investment into multiple facilities. Merck recently opened a $1 billion plant in North Carolina, where Novo Nordisk is also undertaking a $4.1 billion fill and finish expansion. And Johnson & Johnson is ploughing $2 billion into a biologics facility in New Jersey. But the cost of site construction might rise further because of the 25 percent tariff Trump has imposed on steel, a major input in industrial construction, she added. “The same concern applies to manufacturing equipment, which is all stainless steel,” she wrote. The largest pharma companies warned through their European industry association, EFPIA, that pharma research, development and manufacturing is likely to be redirected toward the U.S., when they sat down for crisis talks with European Commission President Ursula von der Leyen this week. But the group — conscious that interinstitutional negotiations are about to begin on a Brussels plan to overhaul landmark EU pharma legislation, and the industry’s existing lucrative patent protection with it — added that the migration could be put on hold if Europe “delivers rapid, radical policy change.” That would mean “strengthening rather than weakening Europe’s intellectual property provisions,” the group said in an emailed statement, as well as “achieving a competitive EU market that attracts, values and rewards innovation in line with other economies at the forefront of patient care.” Alexander Natz, secretary-general of Eucope, which represents mid-sized pharma companies, said: “Many of our members don’t have factories in the U.S. We can’t just build … within two months, factories in the U.S.” Smaller and medium-sized pharma companies tend to have one or two innovative products, he said, and they “don’t have a product portfolio to say, ‘well, OK, I can level out the impact of the tariffs on product A, which is produced in that territory, by increasing sales potentially in product B.” The larger companies that Trump is hoping to entice back might also not think it’s worth the bother. “These tariffs might not be around forever,” said Jeremy Leonard, managing director of industry services at Oxford Economics. “It may actually be in your interest to suck up the tariffs and just ride out the storm,” he said, arguing that those companies might instead choose to reduce investments in research and development rather than switch production. “There certainly are some companies who will do that calculus,” he said. “I don’t think it’s necessarily going to mean a sort of tidal wave of movement, quite frankly.” What actually encourages companies to move — as Trump alluded to when he called out Dublin — isn’t tariffs, said Ned Hux, a pharmaceutical and life sciences tax partner at PwC.  “Targeted tax incentives, streamlined regulatory approvals, and prioritized government procurement could make U.S.-based production more attractive and competitive,” he said, adding those measures could come in the form of tax deductions, lower tax rates on manufacturing activity, tax credits and low-interest financing for domestic production.  “These approaches offer a proactive way to strengthen U.S. pharmaceutical independence without disrupting global trade relationships,” he added. And while Trump has criticized Ireland for attracting big pharma companies, he’s also suggested he wants to reshore production of generic drugs from India and China, with an eye to making medicines cheaper for Americans. ING warns, however, that production in the U.S. would lead to higher prices, as U.S. labor and production costs are higher than those in India, for instance. Generics lobby Medicines for Europe says that its own analysis of API (active pharmaceutical ingredient) supplier locations for the U.S. market demonstrated that for almost 700 APIs approved in the U.S., Europe is the only supplier. “The U.S. alone will struggle to build competitive manufacturing and strategic autonomy,” said its director general, Adrian van den Hoven.  “The knock on effect of tariffs will be to drive up costs even higher for American patients.” Giedre Peseckyte contributed to this report.

BRUSSELS — The EU needs to build more tanks — and there’s no reason why those tanks can’t be green. In a bid to save its decaying steel and metal industries, the EU has formulated a plan to protect the sector against unfair competition from abroad, high energy prices and a looming trade war with the U.S. — all while helping it go green.  With this strategy — which is largely based on leveraging the EU’s arsenal of trade measures against cheaper foreign products and subsidizing the sector’s decarbonization — Brussels is hoping that saving metals manufacturing will also boost the defense industry and ultimately, keep Europe safe.    “A main battle tank contains 50 to 60 tonnes of high-quality steel, a self-propelled artillery system, up to 100 tonnes, a fighter aircraft 3 tonnes of aluminium,” the Commission writes in the plan, adding that “a stable and resilient supply chain for these materials is critical to strengthening the European Defence Technological and Industrial Base, ensuring the EU’s preparedness and internal security.” The 19-page document acknowledges how central steel has been for European integration, with the bloc’s first steps towards cooperation hailing back to the European Coal and Steel Community formed after World War II. “The choice was clear, Europe had to save its steel. We owe this to our history. Europe started with steel,” EU industry chief Stéphane Séjourné said at a press conference on Wednesday, referring to the same landmark 1951 agreement which eventually evolved into the European Union.  What started as a peace-building project by tying French and German interests together is now rapidly turning into a blueprint for manufacturing deterrence against an expansionist Russia unrestrained by U.S. pledges to come to Europe’s defense.  It was no coincidence that the EU revealed major plans on defense, finance and industry on the same day. The bloc’s rude awakening in the first months of Donald Trump’s second term as U.S. President means all the issues Europe faces have been dialed up to twelve. In particular the steel and aluminum industries will feel the impact of Trump’s imposition of 25 percent tariffs on all U.S. imports of the metals a week ago. Foremost a signal to the heavy industry that the Commission recognizes their problems, the Steel and Metals Action Plan paints sectors in near-inevitable decline. “The EU is the only major steelmaking region seeing a decrease in capacity,” the plan warns. The bloc’s rude awakening in the first months of Donald Trump’s second term as U.S. President means all the issues Europe faces have been dialed up to twelve. | Chip Somodevilla/Getty Images In the long term, Brussels hopes that focusing on producing low-carbon steel with cheaper locally produced renewable energy, hydrogen, and locally recycled scrap will give the industry an edge against its competitors.   UNPRECEDENTED STEPS If the defense industry and employment figures are the ‘why,’ the ‘how’ is more complicated.  The plan includes measures in the fields of energy, trade and sustainability. Perhaps most pressing, the Commission promises it will find a way to replicate safeguard measures intended to keep shielding the steel sector from imports shut out of the U.S. by Trump’s new tariffs. Safeguards can legally only last for eight years, so replacing them will require some legal creativity on the part of the Commission. The Steel Action Plan promises a proposal in the third quarter. The Commission also promises “to proactively open investigations based on a “threat of injury.” That is eurospeak for opening trade probes into dumping or subsidies like the now-famous case on Chinese electric vehicles. Using the legal term “threat of injury” means the EU doesn’t have to wait until an industry is already feeling the pressure. As an umbrella measure, steel and aluminum might soon be classified based on where they were originally “melted and poured,” not in which country they got altered after that. This would allow the EU to tackle circumvention of existing duties on imports. “Is it enough? History will tell,” a Commission official said, after being granted anonymity to discuss the plan candidly.  “But if we would have promised this a few years ago, no one would have believed it,” they said, referring to the Commission considering restrictions on scrap metal exports, tracking where steel is originally melted and poured, and erecting safeguards for aluminum. Those last two points are completely new measures. GREEN AND SECURE Brussels also gave the most steel-friendly nod yet about upcoming changes to the EU’s carbon-border tax known as CBAM, which places a levy on certain imports from countries without an equivalent carbon price. The Commission promised to expand the carbon tax to also cover specific products made from steel and aluminum — not just the basic metals. That would close what industry groups say is a loophole firms exploit to evade taxes. Early reaction from industry was positive. “We are grateful that the Commission has clearly recognized the strategic importance of the European steel industry to the EU’s sovereignty, security, and competitiveness,” said Henrik Adam, president of steelmakers’ association Eurofer. Europe’s top aluminum lobbyist Paul Voss on Tuesday noted “a completely new, different and better dynamic of exchange with the European Commission,” adding: “Now we need actual deliverables.” Brussels hopes that focusing on producing low-carbon steel with cheaper locally produced renewable energy, hydrogen, and locally recycled scrap will give the industry an edge against its competitors.  | Joseph Prezioso/Getty Images Green groups, meanwhile, welcomed the emphasis on helping heavy industries go green. “This is good news: Accelerating the decarbonization of the steel sector presents the best bet to securing a long-term future for the sector in Europe,” said Johanna Lehne, associate director for clean economy at climate think tank E3G. “We need to see much more concerted industrial policy driving the transition at pace: scaling first-generation near-zero emission pilots, growing demand through lead markets and securing low-cost abundant renewable electricity for the sector,” she added. 

Listen on * Spotify * Apple Music * Amazon Music You’ve gotta hand it to Donald Trump — even when you’re expecting him to surprise you, he still surprises you.  The Unites States president once again caught Europe off guard with his plan to start Ukraine peace talks — after a call with Vladimir Putin. As the post-World War II order veers toward collapse, how many more surprises will it take before European leaders actually do something? POLITICO’s Veronika Melkozerova, Clea Caulcutt and Koen Verhelst join EU Confidential host Sarah Wheaton to analyze how the EU is managing tensions on trade, tech and security. But it’s not all breakups: In honor of Valentine’s Day, we’re talking to one of the duos on POLITICO’s list of Brussels Power Couples 2025: Members of the European Parliament Robert Biedroń and Krzysztof Śmiszek, who mix the personal and political in their fight for LGBTQ rights.  And don’t miss the latest episode of our sister podcast, Power Play. Host Anne McElvoy sits down with Federico Sturzenegger, the right-hand man of Argentina’s president, Javier Milei. They discuss, among other topics, the Mercosur deal. It’s worth a listen, here.

LONDON — Britain’s chances of dodging Donald Trump’s trade war appeared to fade Monday night, as the U.S. president blasted the U.K.’s “huge” trade deficit with his country while imposing sweeping tariffs on metal imports. Speaking from the White House as he signed an executive order to slap 25 percent tariffs on all steel and aluminum imports into the U.S., the president insisted there would be “no exceptions, no nothing … and frankly it may go higher.” When asked if the U.K. would get an exemption, the president said: “We have a huge deficit with the U.K. Big difference.” His latest remarks will do little to calm nerves in Westminster, where officials are scrambling for an exemption to the president’s tariff hikes — and hoping that a largely-services driven trade surplus with the U.S. will calm a president who has traditionally focused more on goods trade. In addition to steep tariffs on metal imports, Trump has threatened reciprocal tariffs on trading partners that would match the duties imposed by other countries in the coming days. Trump’s threats have already sent jitters through the U.K.’s steel industry, which currently exports around 200,000 tonnes of steel per year worth over £400 million to the U.S., its second-largest export market. In a statement issued Tuesday, Gareth Stace, director of UK Steel, the trade association for Britain’s steel industry, said Trump had “taken a sledgehammer to free trade with huge ramifications for the steel sector in the U.K. and across the world. “This will not only hinder U.K. exports to the U.S., but it will also have hugely distortive effects on international trade flows, adding further import pressure to our own market.” DEAL TO BE DONE? Britain’s Chancellor Rachel Reeves nevertheless said on Monday night she would still be going all-out for an exemption from U.S. tariffs, insisting there is “a deal to be done” in an interview with Matt Forde’s Political Party podcast. “Unlike many other countries around the world, we don’t run a trade surplus with the U.S.,” Reeves added. While trade in goods is broadly balanced between the two countries, British statistics record the U.K. as having an overall trade surplus with the U.S., driven almost entirely by services. The chancellor said Prime Minister Keir Starmer will make the case for a U.K. carve-out to Trump directly, while she would go to work on her U.S. counterpart Scott Bessent. The U.K.’s brand-new ambassador to Washington will also be a part of these efforts, after being officially sworn in on Monday. Labour Party grandee and former EU trade commissioner Peter Mandelson told the BBC last night: “I don’t believe that his tariffs are actually directly targeted at us,” adding: “I don’t think we should be overreacting.”

BRUSSELS — U.S. President Donald Trump’s promise to implement new tariffs this week matching those of other countries would hit the EU’s automotive sector hardest in an escalating transatlantic trade war. Trump frequently cites Brussels’ higher tariffs on vehicles as a source of his ire — the bloc charges a 10 percent import tax on vehicles compared to the 2.5 percent levied by the U.S. On top of that, senior Trump administration officials complain, is Europe’s value-added tax of around 20 percent — bringing the total cost to 30 percent. Any Trump tariffs would hit Germany’s automakers the hardest. The big three German firms accounted for 73 percent of the 820,000 units exported from the EU to the U.S. last year, according to research platform JATO Dynamics. “We have millions of cars coming in, BMW and Mercedes-Benz and Volkswagen and just so many different cars. And we don’t do anything about that,” Trump told reporters on Feb. 3, in his strongest direct warning to Europe’s top carmakers. As Trump’s trade war unfolds at speed on multiple fronts, he has already imposed a 10 percent across-the-board import duty on China while suspending 25 percent tariffs against Mexico and Canada for a month. Germany’s carmakers would also be harmed by any tariffs against Mexico as many have substantial production there. UPENDING GLOBAL TRADE NORMS Any increased costs on EU carmakers will put further pressure on an industry already facing declining market share in China and low demand in Europe. “We are deeply concerned about the possible imposition of tariffs by the U.S,” said Sigrid de Vries, secretary-general of EU car lobby ACEA. “Instead of tit-for-tat tariffs, the EU and U.S. should work together for a grand bargain to avoid a potential trade conflict.” The lobbying group started the year calling for European lawmakers to preemptively strike a deal with Washington to avert a trade war. BMW has gone a step further, saying the bloc should lower its tariffs to match those of the U.S. in an effort to appease Trump — and lower its own export costs. BMW has a large footprint in the United States, manufacturing the bulk of its X-series SUVs at its Spartanburg, South Carolina plant, which it then exports to the rest of the world. Such a proposal, however, would be a gift to China. Reciprocal U.S. tariffs would take a wrecking ball to the most-favored nation (MFN) principle that has underpinned the post-World War II trading system. Under it, countries that are members of the World Trade Organization extend their lowest tariffs on a particular good to all of their trading partners. If the EU offers to cut its tariffs on cars to 2.5 percent from 10 percent, it would have to offer the same MFN terms to Chinese manufacturers — undermining the additional duties it imposed last year on made-in-China electric vehicles after an investigation found evidence of huge state subsidies. “It would be a big present for countries like China that we would be reducing our duties without getting anything in return. This would go against the whole philosophy underlying tariff negotiations,” said one Brussels-based trade lawyer, who was granted anonymity due to the sensitivity of the issue. Audi has one option that eludes Porsche, however, and that is shifting production of its Q4 to the U.S. where Volkswagen makes its electric ID.4. | Patrick Fallon/Getty Images With European carmakers in the firing line, Trump’s other protectionist moves on trade are likely to throw manufacturing economics out of whack on both sides of the Atlantic. He has also flagged 25 percent tariffs on imports of steel and aluminum — likely adding to input cost pressures in the U.S. while diverting excess supply of the metals to Europe. Worse, potentially, is a complaint already aired by senior Trump administration officials that European VAT amounts to an additional barrier on U.S.-made autos. “Did you know when you ship a car from the United States to Europe, if they let it in at all because they have many nontariff barriers, that between the VAT and duties, that car is taxed at 30 percent?” White House deputy chief of staff Stephen Miller told Fox News on Monday. “The German car — or a European car sent to America is taxed at 2.5 percent — or basically zero. This is a major reason why the U.S. auto industry has been getting hammered and hemorrhaging jobs for so long,” Miller added. “If they want to be charged less than 30 percent, they’re going to have to lower their barriers, so that it’s fair and equal and, yes, reciprocal treatment.” GERMAN AUTOMAKER EXPOSURE VW subsidiary Porsche exports all of its models from the EU to the U.S., where it sold a record 76,000 cars last year, making it the brand’s largest market. Under pressure in other regions, especially China, the automaker is in discussions to oust its CFO and head of sales before their contracts expire. Audi, another VW brand, similarly exports all of its models to the U.S. from Europe, with the exception of the Q5 that is produced in Mexico. While the U.S. is a bright spot for Porsche, Audi saw its sales dwindle 14 percent last year compared to 2023. Any additional costs will just eat away at their profit margins and exacerbate the problems plaguing parent company Volkswagen. Audi has one option that eludes Porsche, however, and that is shifting production of its Q4 to the U.S. where Volkswagen makes its electric ID.4. “It’s essentially the same car, and they have capacity,” said Matthias Schmidt, a European auto analyst. As for Trump, if he is sincere about reciprocity, he would have to cut the 25 percent tariff on light trucks that the United States has levied since Lyndon B. Johnson was president. The duty is the main reason why U.S. automakers still dominate the domestic market for pickup trucks, with the Ford F-Series once again the top seller last year. Giovanna Coi contributed reporting. This story has been updated.

LONDON — The U.K. is “seeking further clarification” from Washington after U.S. President Donald Trump said he would impose steep tariffs on imports of steel and aluminum in a surprise announcement late Sunday. “Any steel coming into the United States is going to have a 25 percent tariff — aluminum too,” Trump told reporters on Air Force One on Sunday. Trump did not specify when the tariffs would come into effect but said they would apply to all countries — sending U.K. officials working hard to build bridges with the new administration into fresh disarray. The president also said Sunday that he would impose reciprocal tariffs on trading partners that would match the duties imposed by other countries in the coming days. The announcements contradict Trump’s recent suggestion that the U.K. could be spared from his trade war, which has so far targeted China as well as neighboring Canada and Mexico. A senior British government aide said the administration was now “seeking further clarification” on the measures and will “work closely with the industries affected.” “We’ve got a strong and balanced trade relationship with the U.S.,” they added. Meanwhile, a separate U.K. official said British diplomats were immediately “engaging the U.S. system on steel and aluminum tariffs” last night. Both figures were granted anonymity in order to speak freely. That line was echoed by Home Office Minister Angela Eagle on Monday morning. She told Sky News: “We have a very balanced trading relationship with the U.S., I think £300bn worth of trade between our countries, and I think it’s in the best interests of both of us, as long-standing allies and neighbors, that we carry on with that balanced trade. “We will have to wait and see whether the president gets more specific about what he meant by that comment on the way to the Super Bowl.” RETALIATION RISK About one-tenth of the U.K.’s total steel exports were sent to America in 2024. But for a struggling U.K. steel industry facing long-term decline, these measures are not good news. And on top of that, this may only be the start of more widespread tariffs on different products entering the U.S., which would cause serious global economic disruption.  The decision on reciprocal tariffs, which is expected to come Tuesday or Wednesday, would be a major shift from Trump’s previous threat to impose an across-the-board tariff on all imports from across the world. Starmer and his ministers will be mulling whether to hit back against these tariffs — a move which would plunge the U.K. into a trade war with the U.S. and potentially escalate into other areas of the economy.  SEC Newgate’s Allie Renison, a former U.K. business and trade policy adviser, said retaliating could put the U.K. “even more in the firing line” of further Trump measures. “The prospect of reciprocal universal tariffs that he has recently floated could do much greater overall damage to the British economy,” she said.