Trump threatens 20 percent tariffs on EU cars

Sunday, 24 Jun, 2018

President Donald Trump threatened a 20 per cent tariff on cars imported from the European Union unless the bloc removes import duties and other barriers to U.S. goods, escalating a global trade war the EU warned could endanger $300 billion in commerce.

The European Union is enforcing tariffs on 3.4 billion dollars (£2.5 billion) of United States products in retaliation over duties the Trump administration has put on European steel and aluminium. The EU targeted more than $3 billion in American goods exported to the 28-member European Union.

President Donald Trump today threatened to hit imports of European automobiles with a 20 percent tariff if Brussels doesn't remove tariffs and other trade barriers.

Trump's tweet came after the Trump administration last month initiated a so-called Section 232 investigation into the national security implications of automobile imports, which has provoked widespread opposition from USA lawmakers, business groups and major trading partners.

The warning to Mr Trump comes a day after he raged about European Union tariffs put on imported USA cars of 10 percent, compared with America's 2.5 percent levy on cars imported from the US.

The Commerce Department said Wednesday it has exempted some steel products from Japan and four other countries from USA tariffs of 25 percent. Industry data shows German automakers build more vehicles in southern USA states that voted for Trump than they ship to the United States from Germany.

The Dow Jones U.S. autos index also fell 1.4 percent on the tweet, with Tesla, Harley Davidson, Ford and General Motors among the biggest drags.

"Clarity [is] still lacking about how far things will ultimately go between [the] USA and China and the potential ripple effect for world trade", said financial analyst Mike van Dulken. He told automakers at a White House meeting in May he was planning tariffs on some imported vehicles.

Even some Republican lawmakers have said they oppose framing steel and aluminum imports as a national security threat.

The US may justify the auto tariffs on the grounds of national defence, just as it did in March when imposing duties on global imports of steel and aluminium.

Tariffs against the remaining US products valued at 3.6 billion euros (4.2 billion dollars) will take place at a later stage, either in three years' time or after a positive finding in WTO dispute settlement which may occur earlier. Duties at this level could be expected roughly to reduce USA imports of vehicle and auto parts in half.

The U.S. had a surplus in services trade with the European Union of $45 billion in 2017, according to the memo, citing U.S. statistics.

Trump's tariff rhetoric further undermines a United States auto market already in its second year of decline after record sales in 2016, American International Automobile Dealers Association president Cody Lusk said.

Trump used a similar tactic to unilaterally impose tariffs on aluminum and steel imports from a number of countries, enraging a number of USA lawmakers but also his foreign counterparts in Europe, Canada, Mexico, Japan, and a number of other countries.

"Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and overseas", according to PIIE's analysis. Oxford Economics said the consequences could be much greater if Trump imposed tariffs on cars, which leaders from both American and European auto manufacturers have said would lead to net job losses in the US.

Customs agents across Europe s colossal market of 500 million people will now impose the duty, hiking prices on US-made products in supermarkets and across factory floors.

As painful as the brewing trade war could prove, many have seen it coming.

"We did not want to be in this position".

The organisation estimates that a 25% tariff on foreign vehicles and parts for them, assuming the USA does not grant exemptions to some countries, would lead to the loss of about 195,000 jobs in the US.

The U.S. action covers 42 "exclusion requests" from the seven companies, including razor maker Schick Manufacturing Inc. of CT, cutting tool maker Nachi America Inc. of IN and specialty steel supplier Hankev International Inc. of California.