EU warns it will retaliate if US imposes 'disastrous' auto tariffs

Cars of German car maker Mercedes Benz are parked at the automotive terminal at the port of Bremerhaven, northern Germany, on July 23, 2017.
Cars of German car maker Mercedes Benz are parked at the automotive terminal at the port of Bremerhaven, northern Germany, on July 23, 2017.PHOTO: EPA-EFE

BRUSSELS (AFP) - The European Union will retaliate if US President Donald Trump imposes "disastrous" tariffs on automobiles, EU trade commissioner Cecilia Malmstrom warned on Thursday (July 19).

"We are preparing a list of rebalancing measures," Ms Malmstrom said, as Washington studies imposing duties on cars following its tariffs on aluminium and steel.

"Similar moves on cars would be disastrous," the Swedish commissioner told a conference in Brussels.

Her warning comes before her boss, European Commission chief Jean-Claude Juncker, travels to Washington next Wednesday (July 25) to try to persuade Mr Trump to drop tariffs on metals and avoid duties on cars.

"Tariff measures on cars are neither wanted or warranted," Ms Malmstrom said.

"They are at best a solution in search of a problem. At worst they are an illegal move to gain leverage in trade negotiations."

Mr Trump imposed duties of 25 per cent on steel imports and 10 per cent on aluminium in March, but had given temporary exemptions to the EU and some other close trading partners as talks continued.

But those exemptions were lifted in early June, prompting a raft of retaliatory tariffs by the EU, and Mr Trump is now considering whether to impose hefty levies on European vehicles.

German Chancellor Angela Merkel said last week that she would back opening talks with trading partners on lowering automobile duties, in what appeared to be an olive branch to Mr Trump.

But Washington has shown no sign of compromise as it pursues its "America First" policies across a range of issues, even if it means alienating traditional allies.

Besides the tariffs, the US has threatened European companies with huge fines if they continue to operate in Iran, after Mr Trump reimposed far-reaching sanctions while pulling out of the landmark 2015 deal on curbing Teheran's nuclear programme.

Earlier this month Mr Trump implemented tariffs on US$34 billion (S$46.6 billion) worth of Chinese imports, drawing a tit-for-tat response from Beijing.