1EU slaps tariffs on US as trade war erupts

The US announced tariffs on about US$95b worth of goods from foreign countries
MORRIS MACMATZEN GETTY The US announced tariffs on about US$95b worth of goods from foreign countries

24 June, 2018

The Trump administration is trying to reduce the USA trade deficit with China and improve intellectual property protection, although many analysts say tariffs are not an effective way to solving those issues.

The U.S. Commerce Department is investigating whether there should be tariffs on all imported cars and auto parts. "The woes the administration is inflicting on Chinese companies do not simply translate into boons for USA enterprises and the US economy".

Trump's tariff rhetoric further undermines a U.S. auto market already in its second year of decline after record sales in 2016, said Cody Lusk, president of the American International Automobile Dealers Association.

On Monday, U.S. President Donald Trump threatened to hit $200 billion of Chinese imports with 10 percent tariffs if China retaliates against his previous targeting of $50 billion in imports. He has frequently criticized both allies and adversaries for imposing tariffs and trade barriers on American goods.

In an interview with Business Insider Germany last week, Bernhard Mattes, the president of the German Association of the Automotive Industry, said tariffs would hurt not only European automakers but the USA economy as well.

Trade war started brewing in on March 23, 2018, when the USA imposed new tariffs on steel and aluminium with most of the largest steel exporters to the United States exempted at least until May 1, but China is among the countries that are hit. "We don t want to do anything that would harm consumers", he said on Thursday.

"On Friday, the day new European Union tariffs went into effect, Trump tweeted, ".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!"

Last month, Senate Foreign Relations Committee Chairman Bob Corker, R-Tenn., called Trump's idea of imposing tariffs on auto imports "dangerous" and led an effort on Capitol Hill to strip away some of the White House's authority.

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Trump has been banging the drum for "fair trade" with all of the trading partners of the USA since early in his presidential campaign. There's support in the administration and from German auto makers for such an idea, but no agreement has been reached yet.

Trump's message comes two days after Commerce Secretary Wilbur Ross said that no decision has been made about tariffs on automobiles, according to CNBC.

The EU said on Wednesday that its retaliatory tariffs on a list of USA products in response to the US tariffs on steel and aluminum will come into effect on Friday. In the meantime, the USA business community is against the decision to impose trade tariffs. BMW has a big plant in Spartanburg, South Carolina, and Mercedes-Benz has a factory in Tuscaloosa County, Alabama. "We should end the escalation", he said in the comments published on Saturday. Recent G-7 meeting held in Quebec City Canada, to negotiate Trump's stance on punitive tariffs resulted in a fiasco for all democrat leaders.

Cecilia Malmstrom, the EU's trade commissioner, acknowledged that the European Union had targeted some key American imports for tariffs, like Harley-Davidson motorcycles and bourbon, to "make noise" and put pressure on U.S. leaders. The US exported $10 billion worth of passenger vehicles to the European Union previous year. American exports to China that will be most affected by the tariff are vehicles, aircraft, vegetables, plastics, and chemicals.

President Trump aimed his Twitter fire at Europe on Friday, saying a 20% Trump tariff could soon apply to cars imported from Germany and the rest of the European Union.

Trump has long believed that USA workers and companies are ripped off by other nations, which flood the US market with cheap goods while imposing large barriers to make it hard for US companies to compete overseas.

A group representing major USA and foreign automakers has said it was "confident that vehicle imports do not pose a national security risk".

Of their USA sales, BMW imported 70.8 percent from Europe, Mercedes maker Daimler 51.9 percent and Volkswagen 45 percent, according to LMC. Volkswagen imports all of its luxury brands - Audi, Porsche, Bentley and Bugatti.

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