EU warns of retaliation if Trump raises tariffs on cars

Mercedes-Benz cars parked at the German port of Bremerhaven. US President Donald Trump last Friday threatened to impose a 20 per cent tariff on all imports of EU-assembled cars.
Mercedes-Benz cars parked at the German port of Bremerhaven. US President Donald Trump last Friday threatened to impose a 20 per cent tariff on all imports of EU-assembled cars. PHOTO: EPA-EFE

Senior official says bloc will have no choice but to react, and calls for end to escalation

PARIS • The European Union will respond to any United States move to raise tariffs on cars made in the bloc, a senior European Commission official has said, the latest comments in an escalating trade row.

US President Donald Trump last Friday threatened to impose a 20 per cent 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 last Saturday.

The European Autos Stocks Index fell last Friday after Mr Trump's tariff threat.

Shares of US carmakers Ford Motor and General Motors 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!" Mr Trump tweeted.

NO ALTERNATIVE

If they decide to raise their import tariffs, we'll have no choice, again, but to react. We don't want to fight (over trade) in public via Twitter. We should end the escalation.

EU COMMISSION VICE-PRESIDENT JYRKI KATAINEN

Speaking in Duluth, Minnesota, last Wednesday, he told a crowd: "You look at the European Union. They put up barriers so that we can't sell our farm products. And yet they sell Mercedes and BMW, and the cars come in by the millions. And we hardly tax them at all."

The US Commerce Department has a deadline of February next year to investigate whether imports of cars and auto parts pose a risk to US national security.

US Commerce Secretary Wilbur Ross said last Thursday that the department aimed to wrap up the probe by late next month or August.

The Commerce Department plans to hold two days of public comments next month on its investigation of auto imports.

Mr Trump has repeatedly singled out German auto imports to the US for criticism.

He told carmakers at a meeting in the White House on May 11 that he was planning to impose tariffs of 20 or 25 per cent on some imported vehicles, and sharply criticised Germany's automotive trade surplus with the US.

The US currently imposes a 2.5 per cent tariff on imported passenger cars from the EU and a 25 per cent tariff on imported pickup trucks. The EU imposes a 10 per cent 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".

The US last year accounted for about 15 per cent of worldwide Mercedes-Benz and BMW brand sales.

It accounts for 5 per cent of Volkswagen's VW brand sales and 12 per cent of its Audi brand sales.

The EU fought back last Friday against the Trump administration's tariffs on steel and aluminium imports, by slapping penalties on an array of American products that target the President's political base, such as bourbon, motorcycles and orange juice.

The European counter-attack on US$3.2 billion (S$4.4 billion) of goods added another front to a trade war that has engulfed allies and adversaries around the world.

The European Commission, the EU's administrative arm, applied its sanctions more than a week earlier than expected, in what analysts said was a show of strength.

China and Mexico have already retaliated against Mr Trump's moves with their own tariffs, and Canada, Japan and Turkey are readying similar offensives.

REUTERS, NYTIMES

A version of this article appeared in the print edition of The Straits Times on June 25, 2018, with the headline 'EU warns of retaliation if Trump raises tariffs on cars'. Print Edition | Subscribe