The European Union is making a significant move to de-escalate tensions with the United States by offering to lower tariffs on American car imports. This decision comes amidst fears of a potential trade war between the two economic powerhouses.

Bernd Lange, who leads the trade committee in the European parliament and is involved in discussions with the White House, revealed to the Financial Times that the EU is willing to reduce its current 10 percent import tax on US cars to a level closer to the 2.5 percent tariff imposed by the US. Lange emphasized the importance of reaching a deal before costs and tariffs escalate further.

In addition to lowering tariffs on cars, the EU is also considering increasing its purchases of liquefied natural gas and military equipment from the US. This move is seen as a gesture of goodwill towards the Trump administration and an effort to avoid further trade disputes.

The European Union’s car industry has expressed support for the tariff reduction, as there are concerns that President Trump may follow through on his threats to impose tariffs. Trump has previously criticized Europe for not buying American cars and farm products, leading to fears of retaliatory measures.

The potential tariff reduction would not only benefit the US, but also other countries like China under WTO rules. Lange mentioned that while the EU has bound tariffs for cars at 10 percent, there is a possibility of lowering them to demonstrate fair trade relations.

However, if negotiations fail to yield a favorable outcome, the EU has a contingency plan in place. Lange warned that the bloc could retaliate by targeting US tech and financial companies using an anti-coercion instrument created during Trump’s first term. This measure is designed to counter economic pressure tactics aimed at influencing domestic policies.

The decision to offer lower tariffs on US cars is a significant step towards averting a potential trade war between the European Union and the United States. It reflects a willingness on both sides to find common ground and maintain stable economic relations in the face of escalating tensions.