Donald Trump escalates trade war, threatens European carmakers with stiff tariffs

 Donald Trump waves upon his arrival in West Palm Beach, Florida,March 2, 2018.
Donald Trump waves upon his arrival in West Palm Beach, Florida,March 2, 2018.PHOTO: REUTERS

WASHINGTON (WASHINGTON POST) - President Donald Trump on Saturday (March 3) threatened to hammer European automotive companies with steep tariffs as his global trade war snowballed into a third day.

Trump, in a series of Twitter posts while at his Mar-a-Lago resort in Florida, appeared to be responding to warnings from European leaders that his promised tariffs on aluminum and steel would trigger retaliation from numerous major US trading partners.

Bring it on, Trump seemed to say.

"If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars which freely pour into the US They make it impossible for our cars (and more) to sell there. Big trade imbalance!" Trump tweeted on Saturday.

On Thursday, Trump shocked the world - and many of his top advisers - with an off-the-cuff announcement that the United States would impose a tariff of 25 per cent on steel imports and 10 per cent on aluminium imports.

Canada's leadership said they would retaliate with tariffs on US exports, and European leaders said they would as well, targeting Kentucky bourbon, Harley Davidson motorcycles, and blue jeans.

On Friday, Trump wrote in another Twitter post that "trade wars are good, and easy to win."

He also promised to enact what he called "reciprocal taxes" on any country that has a tariff against any US good or service.

 
 
 

His attack on European automakers is mostly a direct threat at Germany, which exported US$23 billion (S$30 billion) in cars to the United States in 2016, according to data aggregated by Massachusetts Institute of Technology.

But large German automakers also have a sizable presence in the United States, with BMW employing thousands of workers in South Carolina and Volkswagen employing thousands more in Tennessee. Those manufacturers produce hundreds of thousands of cars in the US each year, many of which are later exported to buyers in Asia and Europe.

Trump often looks at trade relationships as a zero-sum game, complaining that the United States buys more goods and services from other countries than it sells to them. To that end, US firms sold US$53 billion in exports and imported US$118 billion in goods to Germany last year, the kind of dynamic that he has often complained about.

But critics of Trump's approach have often complained that tariffs and trade wars only drive up costs for domestic consumers, a move that would make German cars more expensive for US consumers. Trump has also said these sorts of threats could incentivise foreign companies to expand their US operations, so they don't have to pay the import fees.

Trump has been hammering the German auto industry since before taking office, incensed at their move to expand production in Mexico and threatening them with a 35 per cent tariffs on any cars brought into the US.