Donald Trump threatens 20% tariff on European Union cars

Narendra Modi Donald Trump

The US Commerce Department has a deadline of February 2019 to investigate whether imports of automobiles and auto parts pose a risk to US national security. Industry data shows that German car-makers build more vehicles in southern USA states that voted for Trump in the 2016 presidential election than they ship to the U.S. from Germany.

The Trump administration initially exempted Argentina, Australia, Brazil, Canada, the European Union, Mexico and South Korea from the import duties, but drew criticism for imposing the tariffs on Canada, the European Union and Mexico on June 1. The US has pledged to impose 25 per cent tariffs on $US34 billion in Chinese goods on July 6, and China vowed to retaliate in the same amount of US imports.

The spat is part of a wider tussle over global trade.

Harley-Davidson Inc. expects to have to raise prices in Europe this autumn, when new motorcycle models are due to hit dealers' showrooms, due to EU tariffs on US goods, the head of its central European business said.

It is hard for the White House to unilaterally impose tariffs without input from Congress, but Trump has found several ways to do it this year.

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"If suddenly vehicles are 20% more expensive, it's got to hurt sales", said Rebecca Lindland, analyst with Cox Automotive. The European Union has a 10 percent tariff on cars imported from the United States. The Wall Street Journal reported that Richard Grenell, the USA ambassador to Germany was to present the offer to Trump this week.

Most of the cars imported to the United States from Europe are luxury models.

European automakers already make some cars in the United States. "With Brexit and USA tariffs, this market could shrink further".

The president told the European carmakers to "Build them here!" - but many European carmakers build a large percentage of their vehicles in the U.S. already, according to the EU. Of those cars, just over half were exported by German vehicle makers. Administration officials have said China should strengthen protections for USA companies' intellectual property, and reduce tariffs on USA products.

The Republican leader regularly laments seeing many Mercedes vehicles in the streets of NY, and not enough American cars in Europe. Daniel Gros, director for Economy and Finance at the Centre for European Policy Studies, said that in a trade war everyone stands to lose, but the United States has put itself in a worse position.

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A Mercedes spokesman has been approached for comment.

Customs agents across the European Union internal market of 500 million people will impose the duty, hiking prices on US-made products in supermarkets and across factory floors.

FILE PHOTO - Parked cars are pictures at the vehicle terminal at the port of Valencia, Spain May 29, 2018. "Germans are the world's leaders in the premium market as they hit before American and Japanese cars, and have been evolving fast, with large ranges of products".

The group, whose members include European automakers BMW, Volkswagen, Jaguar-Land Rover, Mercedes-Benz, Porsche and Volvo, says automakers favor reducing trade barriers and "achieving fairness through facilitating rather than inhibiting trade".

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