DISBELIEF:US senators say there is no merit to claiming that auto imports threaten the US’ defense capabilities. Daimler’s paring of its profit outlook points to tariff effects.
US President Donald Trump threatened a 20 percent tariff on cars imported from the EU unless the bloc removes import duties and other barriers to US goods, escalating a global trade war that the EU has warned could endanger US$300 billion in commerce.
“Based on the Tariffs and Trade Barriers long placed on the US 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 US. Build them here!” Trump said in a tweet on Friday.
The EU planned to retaliate, a European Commission memo obtained by Bloomberg showed.
“An introduction of US tariffs would be met with equivalent penalties imposed by affected trading partners,” it said.
Shares of Volkswagen AG, Daimler AG and BMW AG fell in Frankfurt, and US auto companies erased earlier gains in New York trading.
Trump’s tweet came hours after the EU imposed tariffs on about US$3.3 billion of US products in response to US levies on imported aluminum and steel.
The EU tariffs target politically resonant products, including 25 percent duties on Levi Strauss & Co jeans, Harley-Davidson Inc motorcycles, bourbon and peanut butter.
The EU measures cover about 200 categories, also including various types of corn, rice, orange juice, cigarettes, cigars, T-shirts, cosmetics, boats and steel.
The US might justify the auto tariffs on grounds of national defense, just as it did in March when imposing duties on global imports of steel and aluminum.
Trump initially exempted the EU from the metal tariffs, but let the temporary reprieve expire after negotiations with the Europeans fell apart.
The US Department of Commerce last month started investigating whether imports of cars and light trucks hurt the US’ ability to defend itself by eroding its auto industry. If the findings show a threat to the US, a 1960s-era trade law gives Trump authority to impose import restrictions without congressional approval.
Many US lawmakers have been critical of Trump’s use of the trade law, which was rarely applied before he took office.
US Secretary of Commerce Wilbur Ross on Wednesday during a US Senate hearing faced heated questions from Republican lawmakers who said that there is no merit to claiming that auto imports threaten the country’s defense capabilities.
Trump’s tweet could undermine his government’s argument for auto tariffs, said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies in Washington and former commerce department official.
“Having ordered an investigation into whether auto imports are a national security threat, he has now undercut that by reaching his conclusion before the investigation has barely begun,” Reinsch said.
“It’s a classic case of ‘ready, fire, aim,’ and it will only lead to litigation in the US and a loss at the WTO when we are inevitably taken there,” he said.
Trump’s tariff rhetoric further undermines a US auto market already in its second year of decline after record sales in 2016, American International Automobile Dealers Association president Cody Lusk said.
Daimler’s decision on Thursday to pare its profit outlook was an early example, he said.
“You’re already going to see prices going up incrementally as a result of the steel and aluminum tariffs in the auto sector,” said Lusk, whose group represents foreign-branded auto dealers in the US.
“All of that, combined with increasing interest rates, is a recipe for disaster,” he said. |
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