German carmakers will be big losers of a trade war with US
Pity European Union Trade Commissioner Cecilia Malmstrom. The Swedish former political science lecturer is spearheading the bloc's response to US President Donald Trump's tariffs on imported steel and aluminium. Her first step was decisive. However, things will get harder if Trump raises the stakes.
The EU hit back quickly on Thursday evening after its exemption from US levies had expired. Malmstrom said the Commission and member states would impose "rebalancing measures" hitting €2.8bn worth of US goods, including Harley-Davidson motorcycles and bourbon whiskey.
Neither move amounts to much economically. Steel and aluminium exports to America represent 0.05pc of EU GDP, according to ING, while the EU's list covers little more than 1pc of US exports to the bloc.
But the EU measures shrewdly target products that are made in states controlled by Republican leaders in Congress.
Europe's difficulty is deciding what to do if the spat escalates. Trump has kicked off a process that could slap tariffs of up to 25pc on imported cars.
He told French President Emmanuel Macron he would pursue German carmakers until there were no more Mercedes-Benz cars rolling down New York's Fifth Avenue, the magazine 'Wirtschaftswoche' reported.
Germany's priority is to protect Volkswagen, Daimler and BMW, which have a collective market value of more than €200bn. Evercore ISI analysts reckon that a 25pc US import tariff would cost the trio about €4.5bn.
That is equivalent to the annual salary of about 80,000 German industrial workers, based on figures provided by the Gesamtmetall employers' association.
Germany's Economic Minister Peter Altmaier has pushed to appease Trump by cutting the EU's current 10pc duty on imported automobiles, 'Handelsblatt' reported in March.
The problem is Paris. Macron and French officials are opposed to concessions and refuse to talk "with a gun to our heads", according to Reuters. That's a respectable position, but it's easier to be principled when another country's corporate champions are on the line.
Countries in the shadow of an increasingly belligerent Russia, like Poland and the Baltics, are likely to oppose any measure that would threaten US security guarantees.
Malmstrom's job of forging a united European trade-war strategy can only get harder.