BRUSSELS (AP) — The head of the European Union’s executive has warned the United States that the bloc will not negotiate trade concessions under threat, a day after President Donald Trump granted the EU only a one-month extension on steel and aluminum tariffs.

EU Commission President Jean-Claude Juncker told the European Parliament Wednesday that the exemption should be “unconditional and permanent.”

Juncker added that “this should not happen between allies.”

The 28-country EU has warned that it will retaliate if Trump goes ahead with the tariffs by May 31, a development that could set off a trans-Atlantic trade war.

“We will continue our negotiations with the U.S. but we will refuse to negotiate under threat,” Juncker said. “We are now, pure and simple, calling for their withdrawal.”

The Associated Press
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EU warns Trump’s ‘dangerous’ policies pose threat to global economy
Forecasts say trade protectionism could throw expansion off track

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By Mehreen Khan in Brussels
The European Commission has warned that US president Donald Trump’s economic policies are a threat to global financial stability and the health of the world economy.

In its latest set of economic forecasts, the commission said Washington’s spending boom and trade protectionism were a bigger risk to Europe than the recent slowdown in the eurozone economy.

The EU’s spring forecasts, released on Thursday, pointed to a “dangerous nexus” of economic policies in the US — where fiscal stimulus, higher Federal Reserve interest rates and the prospect of an international trade war were likely to spook markets and European businesses.

“The materialisation of these risks could throw the expansion off track in a European economy that has recently been more reliant on investment and exports,” the report said.

It added: “Europe’s real economy would not remain immune to abrupt market corrections. The combination of a pro-cyclical fiscal stance and inward-looking trade policies presents a dangerous nexus.”

The intervention from Brussels comes amid heightened trade tensions between the US and its international partners over exemptions from White House tariffs. Mr Trump this week gave the EU a 30-day exemption from steel and aluminium import tariffs the US imposed last month.

Pierre Moscovici, the EU’s economics chief, said Brussels would continue to lobby for a permanent exemption from the tariffs. “We believe protectionism is not he solution, it creates only problems,” he said.

Trump delays steel tariff deadline for allies

The commission’s forecast said trade tensions were an “unambiguously negative risk to the global economy”.

“While the increase in tariffs decided so far by the US administration, and the retaliation measures decided by China, should have only a marginal impact on the global outlook, further escalation would be more harmful and could also lead to a sustained loss of confidence in the global multilateral trading system, or further disruption to global supply chains.”

Growth in the eurozone economy has moderated this year, slowing to its weakest pace in 18 months at the start of 2018, according to data released on Wednesday. But the commission’s economists made no changes to their gross domestic product forecasts compared with an earlier forecast in February. Brussels still expects the 19-country bloc to expand at a pace of 2.3 pace in 2018 and 2 per cent in 2019.

The UK is expected to be the worst-performing EU economy, matched only by Italy, as it approaches its exit from the EU in March next year. Growth will decelerate to an annual pace of 1.5 per cent this year and 1.2 per cent in 2019.

Brussels’ forecasts for Britain are based on a “purely technical” assumption of a status quo in trading relations between the UK and the EU27.

“Within Europe, risks related to the outcome of the Brexit negotiations remain,” said the commission.

After years of austerity, 2018 will be the first year all the eurozone’s 19 economies will fall below Brussels’ 3 per cent of GDP deficit ceiling. The milestone has been reached with France and Spain becoming the last two economies to bring their deficits down to 2.3 per cent and 2.6 per cent respectively in 2017.

Fixing the budget deficit has been a goal of President Emmanuel Macron’s year-old government in France in his attempt to win support for his eurozone reforms from German chancellor Angela Merkel.

Germany’s debt-to-GDP ratio will also come under the EU’s 60 per cent ceiling in 2019, falling from 60.2 per cent this year to 56.3 per cent in 2019.

Mr Moscovici said the new German government had “some room to manoeuvre” on increasing spending after Berlin unveiled a new budget with modest investment increases on Wednesday. Higher government spending “would be desirable not only for the country but for the eurozone as a whole”, he said.

The commission expects Italy, despite having no permanent government in place, to maintain a 1.5 per cent GDP growth pace this year before slowing in 2019. The eurozone’s third-largest economy has been blighted by slow growth and high levels of public debt for decades. Brussels now expects Italy’s debt pile to slip below the 130 per cent mark at 129.7 per cent in 2019.

“The biggest risk to this rosy outlook is protectionism, which must not become the new normal: that would only hurt those of our citizens we most need to protect,” said Mr Moscovici.

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