Trump threatens U.S. tariff on European Union auto imports

Trump threatens U.S. tariff on European Union auto imports

European and U.S. autos shares fell sharply on Friday after U.S. President Donald Trump threatened a 20 percent tariff on all vehicle imports from the European Union if EU "tariffs and trade barriers" are not removed.

European Union trade commissioner Cecilia Malmstrom adresses a news conference on the USA tariffs on steel and aluminium in Brussels on June 1.

President Donald Trump escalated his trade dispute with China earlier this week, ordering the US Trade Representative to compile a list of $200 billion worth of Chinese goods to be subjected to an additional 10% tariff.

Within hours, Trump responded with a threat to impose a 20 percent tariff on cars imported from the European Union.

President Trump is threatening to impose a 20 percent tariff on all auto imports from Europe, ahead of results from an investigation initiated last month by his own Commerce Department.

Currently, the U.S. charges just 2.5% on auto imports; this is lower than the EU's 10% and China's 25%, although the latter will lower its tariff to 15% from 1 July. The European Union, Canada, Mexico, and India are outraged and have retaliated by imposing tariffs on USA goods.

The tariff could hike new vehicle prices by thousands of dollars on popular models from automakers such as BMW, Mercedes-Benz, Volkswagen, Volvo, Audi, Buick, Honda, Jaguar, Jeep, Fiat, Land Rover, and Porsche.

According to people familiar with the deliberations, US Ambassador to Germany Richard Grenell has met with executives at major German automakers, including BMW, Volkswagen and Daimler, to discuss Trump's threat of tariffs. Shares U.S. carmakers Ford Motor Co and General Motors Co also dropped.

The Washington trade association for BMW, Daimler and Volkswagen's operations in the U.S. warned consumers will be harmed by higher tariffs.

The EU has just slapped tariffs on $3.4 billion in USA products, ranging from bourbon to motorcycles, in retaliation for Trump's decision to tax imported steel and tariffs. The EU tariffs will target products including blue jeans, bourbon, and motorcycles, and are in a direct response to the exemptions being revoked from the US tariffs.

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As Trump has threatened to pull out of NAFTA, Jim Polsfut, a local leader with longstanding business ties in Mexico, told me that changing the terms of trade must not be done by taking unilateral action as it will likely destabilize the present delicate balance of U.S. -Mexico relations. BMW is one of South Carolina's largest employers, with more than 9,000 workers in the state.

Trump used a similar tactic to unilaterally impose tariffs on aluminum and steel imports from a number of countries, angering a number of USA lawmakers but also his foreign counterparts in Europe, Canada, Mexico, Japan, and a number of other countries.

The U.S. already taxes imports of European cars at a rate of 2.5 percent.

The U.S.is scheduled to start taxing more than $30 billion in Chinese imports in two weeks.

"The trade that we believe in is built on rules, trust and reliable partnership", President Jean-Claude Juncker said in a speech in Dublin last night.

"It wouldn't take that much for financial markets to combine with businesses that are waiting to turn this into a big global event".

Nearly 1 million U.S.jobs are tied directly to auto and parts manufacturing, according to the Bureau of Labor Statistics.

"So, they're basically saying, 'We are going to sell you millions of cars".

The Auto Alliance has said it was "confident that vehicle imports do not pose a national security risk".

He spoke to White House trade adviser 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.

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