"Then we will also do that," Mr Juncker said in response to Washington's proposed measures to impose tariffs on vehicles. REUTERS
"Then we will also do that," Mr Juncker said in response to Washington's proposed measures to impose tariffs on vehicles. REUTERS

Economy

EU to impose retaliatory duties if the US fails to lift auto tariffs

The "ceasefire" negotiated with the White House in July must be respected says EU President says

The European Union will respond in kind if US President Donald Trump reneges on his pledge not to impose car tariffs, European Commission President Jean-Claude Juncker said as trade tensions between Europe and the United States rose again.

Mr Juncker told German broadcaster ZDF on Friday that the EU would not let anyone determine its trade policies. If Washington decided to imposed tariffs on vehicles after all, he said, "then we will also do that".

Mr Trump rejected on Thursday an EU offer to eliminate tariffs on cars and said the EU's trade policies are "almost as bad as China", Bloomberg News reported.

Mr Juncker said he had negotiated a "ceasefire agreement" on trade with Mr Trump in July and while such deals were often jeopardised, they were generally respected.

Chancellor Angela Merkel is due to meet Juncker on Tuesday, German government spokeswoman Ulrike Demmer said on Friday. She declined to comment on Trump's latest remarks but said Germany fundamentally sought to lower trade barriers and promote free trade.

The trade issue is also likely to be addressed when Merkel meets French President Emmanuel Macron in France later on Friday.

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The EU remains at odds with the United States over the US blocking of the appointment of judges at the World Trade Organisation, over tariffs set for reasons of national security, and over Washington's tough stance towards China.

Mr Trump agreed in July to hold back on threatened 25-per cent car tariffs while the United States and Europe talked about cutting other trade barriers, but US officials have grown frustrated about the slow pace of progress.

Speaking to the trade committee of the European Parliament on Thursday, European Trade Commissioner Cecilia Malmstrom said the EU had "profound disagreements" with the United States.

Malmstrom said a working group that she and US Trade Representative Robert Lighthizer will oversee on the issue was not engaged in formal negotiations.

She added that the EU would be willing to reduce its car tariffs to zero if the United States did the same, going beyond the provisional agreement struck in July which referred only to "non-auto industrial goods".

In the Bloomberg interview, Trump said of the EU proposal to scrap auto tariffs: "It's not good enough."

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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