Trump plans to impose 20% tariff on European cars in response to EU tariffs

The European tariffs on US items target politically resonant products, including 25 per cent duties on Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey

President Donald Trump said he plans to impose a 20 per cent tariff on all cars imported from the European Union unless the trade bloc “soon” removes import duties and other barriers to US goods, escalating global trade tensions.

“Based on the Tariffs and Trade Barriers long placed on the US and (on its) great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20 per cent Tariff on all of their cars coming into the US. Build them here!” Trump said in a tweet on Friday.

Volkswagen AG, Daimler AG and BMW AG each fell in Frankfurt.

Trump’s tweet came hours after the EU imposed tariffs on about $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 per cent duties on Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey. The EU measures cover a total of around 200 categories in total, also including various types of corn, rice, orange juice, cigarettes, cigars, t-shirts, cosmetics, boats and steel.

Trade War

Trump’s tweet threatens to broaden a trade war that he’s already sparked with China. The US has pledged to impose 25 per cent tariffs on $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 is in Washington this week seeking a deal on auto levies.

He spoke to White House trade adviser Peter Navarro, Commerce Secretary Wilbur Ross, US Trade Representative Robert Lighthizer and Treasury Secretary Steve 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.

Rarely Used

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 industry. 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 used before he took office. Ross during a Senate hearing on Wednesday faced heated questions from GOP lawmakers who argued there was no merit to claiming auto imports threaten the country’s defence capabilities.