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"The European Commission is developing a plan to offer Donald Trump the prospect of a trade deal with the EU in exchange for a permanent exemption from U.S. steel and aluminum tariffs, according to five EU officials and diplomats. The plan, which has strong backing from Berlin, has been raised in bilateral discussions with France, Italy and other EU countries. It foresees offering the U.S. a scoping exercise in which both sides would analyze the content and feasibility of a potential trade deal. The aim is to use the prospect of a trade deal as a bargaining chip to exclude the EU from punitive tariffs of 25 percent on steel and 10 percent on aluminum announced by the American president last month. The U.S. subsequently exempted the EU from the tariffs until May 1 pending further discussions, although Trade Commissioner Cecilia Malmström has demanded the EU be permanently released from the tariff threat. “In our ongoing talks with the American side, we are insisting on getting a full exemption from the announced steel and aluminum tariffs. Once that has been agreed, we would be open to discuss various possible ways of reducing trade irritants,” said a Commission spokesperson. “Malmström is already discussing the plan with [U.S. Commerce Secretary Wilbur] Ross,” said one EU diplomat...“The Germans have calculated that industrial trade with the U.S. is so big that it would cover substantially all trade,” said an EU diplomat. That’s important, because covering the vast majority of bilateral trade is an important criterion for a deal to be valid under global trade rules. The officials stressed that the discussions are still ongoing and that no proposal has been approved by EU countries. Germany and France are in close bilateral consultations over the plans, and French President Emmanuel Macron will be in Washington from April 23-25, where he is expected to raise the issue of potential trade talks with Trump...France is insisting that the EU should only negotiate trade deals with countries that have signed the Paris climate agreement, from which the U.S. withdrew its participation under President Trump. “That’s a factor that would complicate talks,” said a French official."

Posted April 16th, 2018