US President Donald Trump said that the US would impose tariffs on European car exports if the European Union choose to retaliate against his newly imposed duties on metals. “If the E.U. wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US,” Mr. Trump tweeted. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!”
Despite the warnings, imposing tax on the imports of European cars would prove to be more challenging than President Trump suggests. European automakers employ thousands of American workers and have factories in a number of US states including Alabama, South Carolina, Michigan and Texas. For example, the German carmaker BMW manufactures sport-utility cars in South Carolina and exports at least 70% of them abroad.
The White House is to enact a law that would impose 25% tariffs on imported steel and 10% on aluminum. Some economists warn that tariffs that are not applied through the World Trade Organization (WTO) could generate a series of reprisals and retaliatory actions that could lead to a trade war. The war might have even already started when the EU Commission responded at the end of last week that it would retaliate against any tariffs on metals.
The EU executive said that it was preparing a package that would affect a total of $3.5 billion in US exports including denim, bourbon, and Harley-Davidson motorcycles. EU Commission President Jean-Claude Juncker promised to “defend European jobs”, saying that “we must…show that we also take measures.” Mr. Juncker then added that “I don’t like to use the word ‘trade war,’ but I can’t say how this wouldn’t be warlike behavior.”