Updated at 4.15pm
Washington will announce plans to impose tariffs on EU steel and aluminium imports as early as Thursday, two sources said, while a magazine reported President Donald Trump was now focused on pushing German cars from the country.
Two sources briefed on the matter said Trump's decision on metal tariffs would land before Friday's deadline for expiry of exemptions granted to the European Union, Canada and Mexico.
German magazine Wirtschaftswoche reported on Thursday that Trump had told French President Emmanuel Macron he wanted to stick to his trade policy long enough until no Mercedes-Benz cars were cruising through New York.
The Trump administration launched a national security investigation last week into car and truck imports, using the same 1962 law that he has applied to curb incoming steel and aluminium.
French Finance Minister Bruno Le Maire met US Commerce Secretary Wilbur Ross on Thursday, the latest in a series of EU-US meetings designed to end the stand-off.
"It's entirely up to US authorities whether they want to enter into a trade conflict with their biggest partner, Europe," Le Maire told reporters after the meeting.
Europe did not want a trade war, he said, but Washington had to back down from "unjustified, unjustifiable and dangerous tariffs". The European Union would respond with "all necessary measures" if the United States imposed them.
Ross hinted that tariffs were coming. "If there is an escalation it will be because the EU would have decided to retaliate," he told French daily Le Figaro.
"The next question would be: how will the president react? You saw his reaction when China decided to retaliate."
When China targeted key US imports in retaliation against US tariffs on $50 billion of Chinese goods in April, Trump ordered US officials to identify a further $100 billion of Chinese products the United States could hit.
US BOURBON, HARLEYS ON EU LIST
Trump's decision would come either before markets opened or after they closed, Ross said. The two sources briefed on the matter said the announcement was planned for the morning in Washington but that the timing could still change.
The European Commission, which coordinates trade policy for the 28 EU members, has said the bloc should be permanently exempted from the tariffs since it is an ally and not the cause of steel and aluminium overcapacity.
EU countries have given broad support to the Commission's plan to set duties on €2.8 billion of US exports, including whiskey and motor bikes, if Washington ends the EU tariff exemption. EU exports potentially subject to US duties are worth €6.4 billion.
Germany, whose car exports to the United States are more than half the EU total, has previously been at odds with EU partners, suggesting a softer approach.
However, Economy Minister Peter Altmaier appeared with Le Maire in Paris on Wednesday, pledging a unified line.
"We are prepared to react in a united and clear way whatever the decision of the (US) president," he said.
The tariffs, which have prompted several challenges at the World Trade Organisation, are aimed at allowing the US steel and aluminium industries to increase their capacity utilisation rates above 80 per cent for the first time in years.
European Parliament reaction was swift
The European Union has no choice but to defend itself and its industries after the United States said it would impose tariffs on EU steel and aluminium on Thursday, the centre-right leader in the European Parliament said.
"We will have no choice but to defend European industry, jobs and interests. We will not accept this highly regrettable decision without reacting," Manfred Weber, an ally of German Chancellor Angela Merkel, said on Twitter.