EU delivers stark warning to US over auto tariffs

The EU has warned Washington that a threat to slap Europe with major auto tariffs could inflict serious damage to the US economy and would prompt strong retaliation.

The admonishment, written in a letter to US authorities dated Friday, came as US President Donald Trump said Europe is "possibly as bad as China" on trade in one of his biggest provocations to his country's longtime transatlantic allies.

Trump's taunt was the latest salvo in an escalating trade war that saw the EU slap duties on US-made jeans and Harley Davidson motorcycles in a tit-for-tat response to US tariffs on European steel and aluminium exports.

The US tycoon has also threatened to slap a 20 percent duty on EU car imports, based on highly disputed national security concerns, which could be confirmed in the coming months.

"The European Union is possibly as bad as China, only smaller," Trump said on Fox News' "Sunday Morning Futures" programme.

"They send a Mercedes in, we can't send our cars in. Look what they do to our farmers. They don't want our farm products. Now in all fairness they have their farmers... But we don't protect ours and they protect theirs," he said.

The comparison is particularly painful to Europeans, which are attempting to forge common ground with the Trump administration on the idea that the real danger to fair trade is China.

European Commission President Jean-Claude Juncker is to visit Washington by the end of July to help resolve the bitter trade dispute.

"We should de-dramatise these relations," Juncker told a press conference following a European Union summit on Friday, the same day the letter was delivered to Washington.

In the letter to US authorities, the European Commission, which handles trade policy for the bloc's 28 members, painted a stark picture of what the US economy would face if Trump followed through on his threat.

"Economic analysis confirms that an increased tariff on these products will be harmful first and foremost for the US economy," said the letter, seen by AFP today.

The commission said "up to $294 billion of US exports... could be subject to countermeasures across sectors of the US economy", which was equivalent to a staggering 19 per cent of total US exports in 2017.

The commission also underlined that European car companies were important contributors to the US economy and "well established" there. "In 2017, US-based EU companies produced close to 2.9 million automobiles, which accounted for 26 per cent of total US production," it said.

These companies support 120,000 direct and indirect US jobs in plants across the country, the EU said, pointing to sites in South Carolina, Alabama, Mississippi and Tennessee -- southern US states known for their unwavering support for Trump.

That tactic is similar to the EU's retaliation on metals tariffs that came after Trump's administration on June 1 struck Europe as well as allies in Canada, Mexico and elsewhere with tariffs on aluminium and steel.

Trump has attacked the legendary Harley-Davidson motorcycle company, warning "we won't forget" after the firm said it planned to shift some manufacturing offshore due to EU tariffs.

EU officials suggested Trump had only himself to blame for the falling-out with a company he had previously hailed as "a true American icon".

Canada's retaliatory tariffs took effect yesterday against American products including Florida orange juice, ketchup and Kentucky bourbon.