EU to respond to any US auto tariff move

Narendra Modi Donald Trump

While Indian PM Narendra Modi wants free trade US President Donald Trump is looking at imposing tariffs

US President Donald Trump has issued another warning to the European Union, threatening to slap the bloc's automakers with 20 percent tax levies unless trade barriers placed on American corporations are lifted.

Bill Reinsch, senior adviser at the Center for Strategic and International Studies in Washington and former Commerce official, said the president's tweet may undermine his government's argument for auto tariffs. He charged that a succession of poorly negotiated accords - including the North American Free Trade Agreement and the pact that admitted China into the World Trade Organization - put American manufacturers at an unfair disadvantage and destroyed millions of USA factory jobs.

In May, the Trump administration floated a 25 percent tariff on vehicle imports, framing them as a means to ensure the vitality of key US industries. "However, the unilateral and unjustified decision of the impose steel and aluminum tariffs on the EU means that we are left with no other choice", said EU Trade Commissioner Cecilia Malmstrom.

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

Trump had previously described China's unusually high import tariff as "stupid trade" and threatened to raise tariffs on EU-imported cars.

"Our baseline assumption is that automotive tariff threats are being used as a negotiating tactic", wrote Jeff Schuster, president of forecasting for industry analyst LMC Automotive, in a blog post."However, risk is mounting that this ploy could backfire and further escalate into something more permanent, or an outright trade war".

China is also planning to impose additional tariffs of 25% on chemical products, medical equipment and energy imported from the USA, with a value equalling US$16bn. The EU imposes a 10% tariff on imported USA cars. Other items: rice, sweet corn, orange juice, chewing tobacco and snuff, eye make-up, rowing boats and canoes.

The list also hits clothing along with bed linen and men's leather footwear, eye make-up and lipsticks, plus a host of steel products. Trump's tariffs, he said, contradict "all logic and history".

The EU has announced a two-phase response to the United States steel and aluminium measures.

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"We import about 20 percent of our steel", Chitwood said.

European consumers would be able to find "alternatives", European Commission Vice President for trade Jyrki Katainen said.

"If we chose products like Harley Davidson, peanut butter and bourbon, it s because there are alternatives on the market".

The US Chamber of Commerce noted that American auto production has doubled over the past decade, and said tariffs "would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war". "What's more, these products will have a strong symbolic political impact". It is going to hurt the stock market.

Another one of Trump's Friday morning tweets was directed at Mexico, and he took on a much friendlier tone than usual when discussing the NAFTA partner's trade and immigration policies.

Relations plumbed new depths at the recent G7 summit when Trump abruptly rejected the joint statement and bitterly insulted his Canadian host, Prime Minister Justin Trudeau.

Although American goods already in the United Kingdom will not increase in price overnight, shipments leaving the USA for Europe from Friday onwards will be charged the tariffs.

As he sought to reach a denuclearization agreement with North Korea's Kim Jong-Un, Trump has likewise minced no words in chastising his European counterparts.

Malmström said the bloc will remove its tariffs if the United States rescinds the duties on metals.

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