US speeds EU trade war on auto tariff threat

We will be placing a 20% tariff on all of their cars coming into the US…Build them here! Trump tweets

WASHINGTONUS President Donald Trump threatened a 20% tariff on cars imported from the European Union (EU) unless the bloc removes import duties and other barriers to US goods, escalating a global trade war the EU warned could endanger US$300 billion (RM1.2 trillion) in commerce.

“Based on the tariffs and trade barriers long placed on the US and it great companies and workers by the EU, 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 said in a tweet last Friday.

The EU planned to retaliate, according to a European Commission memo obtained by Bloomberg. “An introduction of US tariffs would be met with equivalent penalties imposed by affected trading partners,” it said.

Shares of Volkswagen AG (VW), Daimler AG and BMW AG fell in Frankfurt, and US auto companies erased earlier gains in New York trading.

Trump’s tweet came hours after the EU imposed tariffs on about US$3.3 billion of American products in response to his barriers to imported aluminium and steel.

The European tariffs target politically resonant products, including 25% duties on Harley-Davidson Inc motorcycles, Levi Strauss & Co jeans and bourbon. The EU measures cover a total of around 200 categories, also including various types of corn, rice, orange juice, cigarettes, cigars, T-shirts, cosmetics, boats and steel.

Trump’s latest salvo against the European auto industry threatens to broaden a trade war that he’s already sparked with China. The US has pledged to impose 25% tariffs on US$34 billion in Chinese goods on July 6, and China vowed to retaliate in the same amount of US imports.

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. Trump initially exempted the EU from the metal tariffs, but let the temporary reprieve expire after negotiations with the Europeans fell apart.

America’s Ambassador to Germany Ric Grenell was in Washington last week seeking a deal on auto levies.

He spoke to White House trade advisor Peter Navarro, Commerce Secretary Wilbur Ross, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin about reducing existing tariffs on cars shipped between the US and Europe to zero. There’s support in the administration and from German carmakers for such an idea, but no agreement has been reached yet.

The Commerce Department in May started investigating whether imports of cars and light trucks hurt America’s ability to defend itself by eroding the country’s auto indus

try. If the findings show a threat to the US, a 1960s-era trade law gives the president authority to impose import restrictions without congressional approval.

Many lawmakers have been critical of Trump’s use of the trade law, which was rarely applied before he took office. Ross during a Senate hearing last Wednesday faced heated questions from GOP ( Grand Old Party) lawmakers who argued there was no merit to claiming auto imports threaten the country’s defence capabilities.

Bill Reinsch, senior advisor at the Centre for Strategic and International Studies in Washington and former Commerce official, said the president’s tweet may undermine his government’s argument for auto tariffs.

“Having ordered an investigation into whether auto imports are a national security threat, he has now undercut that by reaching his conclusion before the investigation has barely begun,” Reinsch said. “It’s a classic case of ‘ready, fire, aim’, and it will only lead to litigation in the US and a loss at the World Trade Organisation when we are inevitably taken there.”

The Washington trade association for BMW, Daimler and VW’s operations in the US warned consumers will be harmed by higher tariffs. “Consumers fare best when tariffs are low,” Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, said in a statement. The group also represents General Motors Co and Fiat Chrysler Automobiles NV. — Bloomberg