Friday, the world witnessed US President Donald Trump threaten Europe with a 20% tariff on auto imported to the US from the European Union.
The European Union is threatening to counteract any new tariffs coming out of Washington against autos produced in the EU. Meanwhile, the very automakers to incur these tariffs are often ones with considerable investments within the United States, employing thousands of American labourers.
The European Union will respond to any US move to raise tariffs on cars made in the bloc, a senior European Commission official said, the latest comments in an escalating trade row.
US President Donald Trump on Friday threatened to impose a 20% tariff on all imports of EU-assembled cars, a month after his administration launched an investigation into whether auto imports posed a national security threat.
“If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” EU Commission Vice President Jyrki Katainen told French newspaper Le Monde.
“We don’t want to fight (over trade) in public via Twitter. We should end the escalation,” he said in the comments published on Saturday.
The European Autos Stocks Index fell on Friday after Trump’s tariff threat. Shares US carmakers Ford Motor Co and General Motors Co also dropped.
“If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US Build them here!” Trump tweeted.
The US Commerce Department has a deadline of February 2019 to investigate whether imports of automobiles and auto parts pose a risk to US national security.
US Commerce Secretary Wilbur Ross said on Thursday the department aimed to wrap up the probe by late July or August. The Commerce Department plans to hold two days of public comments in July on its investigation of auto imports.
Trump has repeatedly singled out German auto imports to the United States for criticis
Trump told carmakers at a meeting in the White House on May 11 that he was planning to impose tariffs of 20 or 25% on some imported vehicles and sharply criticized Germany’s automotive trade surplus with the United States.
The United States currently imposes a 2.5% tariff on imported passenger cars from the EU and a 25% tariff on imported pickup trucks. The EU imposes a 10% tariff on imported US cars.
The tariff proposal has drawn sharp condemnation from Republican lawmakers and business groups. A group representing major US and foreign automakers has said it is “confident that vehicle imports do not pose a national security risk.”
The US Chamber of Commerce said US auto production had doubled over the past decade, and said tariffs “would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.”
German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW is one of South Carolina’s largest employers, with more than 9,000 workers in the state.
The United States in 2017 accounted for about 15% of worldwide Mercedes-Benz and BMW brand sales. It accounts for 5% of Volkswagen’s VW brand sales and 12% of its Audi brand sales.
The threats and tariffs actions appear to follow a similar path as those which have been going down with China. An initial tariffs list is enacted which is met with a measured response from the targeted nation which is then ‘retaliated’ against by the Americans, and so forth.
This is how the trade wars escalate, and in each case, a multitude of industries are adversely impacted, also threatening an innumerable number of jobs, causing precipitous drops in the markets, and increasing the cost of end products purchased by consumers, in each case also affecting the Americans. But that seems about right to Trump. This is war, it’s necessary, and America will win, in Trump’s mind.