Trump escalates trade war talks, threatens 20 percent tariffs on imported cars

  • Trump escalates trade war talks, threatens 20 percent tariffs on imported cars

Trump escalates trade war talks, threatens 20 percent tariffs on imported cars

President Donald Trump on Friday renewed his threat to slap steep tariffs on imports of European-built cars such as BMWs, Mercedes-Benzes and Audis, another warning sign of a brewing worldwide trade war.

The EU and China said on Friday (1 June) they would expand trade and investment cooperation amid the global trade dispute triggered by USA tariffs. The deadline for completing the investigation is February, 2019, but Commerce Secretary Wilbur Ross said Thursday said the department aims to wrap up the probe much earlier, by late July or August.

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.

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".

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. Trump has already imposed tariffs on European steel and aluminum, and Europe on Friday imposed countertariffs on goods ranging from whisky to motorcycles.

The spat is part of a wider tussle over global trade. Chinese reprisals have hit American farmers already.

"The tariffs, if they materialise, would call into question the business case for many niche models we now sell in the United States", a senior executive at one carmaker told Reuters on Friday.

China, India, Mexico, Canada and Turkey are among those to so far hit back with their own tariffs on U.S. imports. He argued that global oversupply of steel and aluminium, driven by China, threatened American steel and aluminium producers, vital to the US.

German automakers did not comment on Trump's tweet.

"The upshot: By exporting more finished vehicles from the United States than it imports to the United States, BMW may be helping to lower America's trade deficit".

That 25% "chicken" tax has been in place since 1964, when the Lyndon Johnson administration initially applied it as punishment for Europe's tax on USA chicken imports, but the protectionist measure outlived that conflict. Luxury cars could add thousands more to their bottom lines.

Automotive stocks fell on the news.

Republican lawmakers and business groups have opposed higher auto tariffs.

China has also been embroiled in a trade war with the U.S., after Trump's government announced additional tariffs of 25% on US$50bn worth of Chinese imports.

Most economists say the outcome of higher global import tariffs will drive up costs for consumers, offsetting much of the benefit of protecting domestic industries for the country imposing them.

In 2017, the USA accounted for about 15% of worldwide Mercedes-Benz and BMW brand sales. It accounts for 5% of Volkswagen's VW brand sales and 12% of its Audi brand sales.