Europe Ready to Retaliate Over Car Tariffs as Trade Dispute Grows

Jeannie Matthews
June 24, 2018

President Donald Trump on Friday threatened in a tweet to unilaterally impose a 20 percent tariff on all automobile imports from Europe, further breaking from Republicans in Congress and front-running an investigation he had ordered from the Commerce Department into whether these imports harm national security.

After he imposed steep tariffs on imported steel and aluminum, the European Union retaliated by slapping $3.4 billion in tariffs on a variety of U.S. products - specifically targeting goods or agriculture produced in states that went for Trump in the last election. The US has pledged to impose 25 per cent tariffs on $US34 billion in Chinese goods on July 6, and China vowed to retaliate in the same amount of US imports.

When the US tariffs on steel and aluminum went into effect on June 1, the European Union said they were "illegal", pledged to impose its own tariffs, and filed a case against the the World Trade Organization.

Mr Trump launched the investigation last month, ordering the Commerce Department to determine if auto imports are a risk to national security.

It's unclear whether Trump was actually referring to the new set of tariffs or to the pre-existing 10 percent tariffs the European Union imposes on USA auto products.

The Japanese yen strengthened to 110.02 against the dollar, up as much as 0.47 percent on the day, after President Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods, fuelling trade war worries with Beijing.

Daimler earlier this week warned that it expects lower sales of Mercedes-Benz cars due to a tax on the import of U.S. vehicles into China.

German automakers Mercedes, BMW, and Volkswagen all have plants in southern states and directly employ more than 20,000 USA workers between them, primarily at those factories.

The European Autos Stocks Index fell on Friday after Trump's tariff threat. Shares of USA automakers Ford Motor and General Motors fell immediately after Mr. Trump's tweet but rebounded and closed higher.

U.S. Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August.

"The rules of global trade, which we have developed over the years hand in hand with our American partners, can not be violated without a reaction from our side".

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It is hard for the White House to unilaterally impose tariffs without input from Congress, but Trump has found several ways to do it this year.

Merkel also cited to the EU's retaliatory tariffs on Bourbon and Harley Davidsons and said: "We don't let ourselves be taken advantage of again and again".

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

Although a large portion of the US's most popular vehicle models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from other countries. If the findings show a threat to the USA, a 1960s-era trade law gives the president authority to impose import restrictions without congressional approval.

Earlier, China underestimated President Donald Trump's resolve to move forward with tariffs unless Beijing changes its "predatory" trade practices, a top USA trade advisor said on Tuesday, in comments that diminished the chances of a negotiated settlement to a looming trade war between the world's economic superpowers.

"The trade that we believe in is built on rules, trust, reliable partnership". Trump has slammed U.S. automakers for manufacturing vehicles overseas.

The introduction of USA tariffs on European Union automobiles and vehicle parts could affect $300 billion in trade, the new EU report, authored by the European Commission, and obtained by Bloomberg states.

The U.S. already has a 2.5 percent tariff on European cars. "And many require a auto to get to their jobs.

I want all the cars made in the United States", Cohn told The Washington Post. Overall, the retaliatory tariffs are worth around $3.26 billion.

"So, they're basically saying, 'We are going to sell you millions of cars".

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