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EU slams US car tariff plans

July 20, 2018

The EU has slammed US President Donald Trump's plans to raise tariffs of up to 25 percent on imported cars. 'A solution in search of a problem' is how EU trade commissioner Cecilia Malmstrom put it.

An old rusty car
Image: Colourbox/E. Christa

The EU will retaliate if US President Donald Trump imposes tariffs on automobiles, EU trade commissioner Cecilia Malmstrom has warned. "We are preparing a list of rebalancing measures," Malmstrom said.

"Tariff measures on cars are neither wanted or warranted," the commissioner said. "They are at best a solution in search of a problem. At worst they are an illegal move to gain leverage in trade negotiations."

Washington is considering imposing duties on cars following the US imposition of duties of 25 percent on steel imports and 10 percent on aluminum in March. It gave temporary exemptions to the EU as talks went on but lifted them in early June, prompting retaliatory tariffs from Brussels.

"Similar moves on cars would be disastrous," Malmstrom said.

Read more: Trump's tariffs on European cars — a massive own goal?

Carmakers on edge over possible US tariffs

EU olive branch

German Chancellor Angela Merkel said last week she would back talks with trading partners on lowering automobile duties. European Commission chief Jean-Claude Juncker goes to Washington next Wednesday to seek to persuade Trump to drop tariffs on metals and avoid duties on cars.

But Washington shows no sign of backing down. Earlier this month Trump implemented tariffs on $34 billion worth of Chinese imports, drawing a tit-for-tat response from Beijing, and called the EU a "foe" last week..

Trump said on Thursday the EU's record $5 billion fine against tech giant Google proves the point that the EU is taking advantage of the US.

Explainer: Trade war

Higher prices, lost jobs

Automakers have warned that tariffs would raise costs and prices. Adam Posen, president of the Peterson Institute for International Economics, estimated that the tariffs would raise auto prices by 9 percent and would cut the industry's output by 1.5 percent, costing 195,000 jobs.

Nearly 98 percent of the cars and trucks that would be hit by the tariffs are imported from US allies: the EU, Canada, Japan, Mexico and South Korea, Posen added. If all of them retaliated by slapping 25 percent duties on US car exports, it would cost up to 1.2 million jobs in the US.

US tariffs on imported cars would slash around €6 billion ($6.99 billion) off German economic output, the president of Germany's DIHK Chambers of Commerce told German television on Friday.

The specter of punitive tariffs

Carmakers warn Trump

General Motors warned this week that "increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad, and risk less — not more — US jobs."

"There is no automaker that has 100 percent exclusively US-sourced parts," Brian Krinock, Toyota's senior vice president for North American factories, said. "It is a global business with global operations."

Toyota manufactures nine models in the US, all of which use some imported parts. About 30 percent of the Camry model's parts are imported, Krinock said, and a 25 percent tariff on those parts would raise the cost of a Camry by $1,800.

The Toyota Sienna, made in Princeton, Indiana, would be nearly $3,000 more expensive, he said, and the Tundra pickup truck, made in San Antonio, Texas, would cost $2,800 more.

Read moreGerman carmakers denounce Trump's new imports threat

French automaker Groupe PSA said this week it could turn to Canada rather than entering the US market if Washington follows through on threats to impose blanket tariffs on auto imports.

The company, which manufacturers the Citroen, Peugeot and Opel brands, had been planning a return by 2026 to the American market, after leaving it in 1991.

"Tariffs would affect how fast and at what price point we return to the US market," PSA North America CEO Larry Dominique told reporters, adding that under a new free trade deal Canada was offering duty-free admission to European-made cars.

The US last year imported $192 billion in vehicles and $143 billion in auto parts, far higher than the $29 billion in steel and $23 billion in aluminum imports. US auto sales reached 17.2 million last year — the fourth-best on record. Since the end of the Great Recession in 2009, US automakers and parts suppliers have added 343,000 jobs.

Puebla - German cars from Mexico

Domestic opposition

In the Senate, Democrat Doug Jones of Alabama and Republican Lamar Alexander of Tennessee have announced plans to introduce legislation opposing Trump's proposed auto tariffs. "Foreign automobiles and auto parts are not a threat to our national security," Jones said. "But you know what is a threat? A 25 percent tax on the price of these imported goods."

The US Commerce Department is set to decide whether to label imported vehicles and auto parts a threat to America's national security and whether to recommend tariffs to the president.

The obscure Trade Expansion Act of 1962 empowers a president to impose unlimited tariffs on particular imports if the Commerce Department finds that those imports threaten national security.

jbh/aos (AFP, AP, Reuters, AP)

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