The European Union will react to US president Donald Trump's import tax on cars shipped from Europe, a vice-president of the European Commission has warned.
Jyrki Katainen called for an end to growing tensions between Trump and the EU over trade tarriffs, because the threat of increased cost to export for either party would hurt domestic industries.
“If they decide to raise their import tariffs, we’ll have no choice, again, but to react. We don’t want to fight in public via Twitter. We should end the escalation,” Katainen said in comments published by French newspaper Le Monde.
Trump recently renewed his threat to the European car industry, threatening a 20% import tax on cars entering the US from the EU.
Based on the Tariffs and Trade Barriers long placed on the U.S. and it 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% Tariff on all of their cars coming into the U.S. Build them here!
— Donald J. Trump (@realDonaldTrump) June 22, 2018
It's the latest in a string of outbursts by Trump in relation to trade tariffs, having expressed disappointment previously at the disparity between European car sales in the US and US car sales in the EU.
Trump has also previously revealed to French president Emmanuel Macron that he wishes to raise levies on imported cars to 25% and obliterate European luxury car sales in the US.
Wirtschaftswoche reports that the comments made to Macron, reported to the media via several EU and US diplomats, could spark a trade war between the two sides. Germany’s car industry is a significant source of income to the EU.
Trump has previously expressed his distain at German luxury brands, particularly Mercedes-Benz, and its prominence in New York’s Fifth Avenue. It’s reported that Trump said the tax would be upheld until Fifth Avenue was devoid of Mercedes models.
Furthermore, Trump has launched a domestic investigation into whether vehicle and automotive parts imports are hindering the US sector’s ability to compete globally. Under the country's Trade Expansion Act of 1962, such a scenario could allow Trump to raise import tariffs to protect national interests.
This was the process undertaken last month when Trump raised tariffs for steel and aluminium imports. Tariffs for those materials now stand at 25% in a move to protect local producers.
Currently, the US charges just 2.5% on car 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. Trump had previously described China’s unusually high import tariff as “stupid trade”.
Although a large portion of the US’s most popular car models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from outside the country. Most come from Asia, but several European brands, including Land Rover, don’t have US factories.