US and EU not close to deal on tariffs - EU's Dombrovskis

By Jan Strupczewski

WASHINGTON (Reuters) -The United States and the European Union still need a lot of work to reach a deal that would prevent the imposition of tariffs on each other's goods, EU Economic Commissioner Valdis Dombrovskis said on Friday.

The U.S. imposed 25% tariffs on EU cars, steel and aluminium in March and 20% tariffs on other EU goods in April. It then halved the 20% rate until July 8, setting a 90-day window for talks to reach a more comprehensive tariff deal.

In response, the EU suspended its own tariffs on some U.S. goods and proposed zero tariffs for all industrial goods on both sides. Dombrovskis said the zero-tariff offer met with only moderate U.S. interest.

"There's a lot of work ahead to come to more concrete parameters and elements and areas of cooperation which would allow us to avoid the implementation of tariffs," Dombrovskis said on the sidelines of the International Monetary Fund meetings in Washington.

The United States sees the EU's value-added tax as one of the non-tariff trade barriers, but Dombrovskis said the 27-nation bloc did not see VAT as impacting trade at all and was not ready to include the tax in trade discussions.

"It's not a trade barrier at all and it does not belong to the conversation. The value-added tax is a consumption tax, similar to the sales taxes in U.S. states on sales of domestic and imported goods," he said.

He also said VAT was a major source of budget revenue for European governments and for the EU budget as well. "So the value-added tax doesn't belong to these conversations," he said.

READY TO FIGHT OFF POTENTIAL FLOOD OF CHINESE GOODS

Dombrovskis said that because the U.S. market was now effectively closed to China after Washington imposed 145% tariffs on all Chinese goods, he asked his Chinese counterparts during meetings in Washington not to flood EU markets with goods redirected from the U.S.

"They didn't specify any concrete plans or measures they possibly would take from their side," Dombrovskis said of his request made during his meetings with China's finance minister and central bank governor.

"They showed understanding that this is an issue, that it is a concern for us, but we didn't enter into what specific measures China would be willing to do to prevent this flooding of the European market," Dombrovskis said.

He said the European Union would move to protect its markets if Chinese goods became a threat.

"From my side I indicated that, of course, if we see some disruptions in the EU market, we will also have to take certain countermeasures to protect our market, to protect our companies, our jobs," he told Reuters.

"That would create a domino effect in terms of those market closures and fragmentation of the global economy. And that's certainly not in our interest, that's not in China's interest, so it should be also in China's interest to avoid this scenario and to show restraint at the current juncture," he said.

(Reporting by Jan Strupczewski; Editing by Andrea Ricci)