EU ready to start trade war if US hits European cars

US President Donald J. Trump (L) talks with the President of the European Commission, Jean-Claude Juncker (R), prior to a plenary session on the second day of the G20 summit in Hamburg, Germany, 8 July 2017. [Felipe Trueba/EPA/EFE]

The EU has threatened the US with countermeasures worth $294 billion if the Trump administration imposes further tariffs on European cars as a result of the ongoing investigation into whether they pose a possible threat to national security.

On the instruction of President Donald Trump, US Secretary of Commerce Wilbur Ross has initiated an investigation into whether imports of automobiles and automotive parts into the US could impair the national security. On Monday (2 July) the EU published its written response to the process.

Following the US decision to impose tariffs on European steel and aluminium exports, the EU announced countermeasures aimed at €2.8 billion ($3.3 billion) of American imports. Based on that experience, the EU estimates that up to $294 billion of US exports could be subject to countermeasures in case of restrictions on European cars.

“This current investigation lacks legitimacy, factual basis and violates international trade rules,” EU said in its response.

“The EU reiterates its firm opposition to the proliferation of measures taken on supposed national security grounds for the purposes of economic protection,” the Commission added.

EU to respond to any US auto tariff move

The European Union will respond to any US move to raise tariffs on cars made in the bloc, a senior European Commission official said, the latest comments in an escalating trade row.

If the result of the investigation leads to restrictions on European cars imports, Brussels is ready to respond, with the Commission warning that “trade restrictive measures would be contrary to international trade rules”.

The EU is confident about its position, stating that “imports of European automobiles in the US are stable, in line with US production and responding to market signals.”

According to the Commission, “there is no economic threat to the US automobile industry which is healthy, having steadily expanded domestic production in the last 10 years.”

Automobile imports from the EU “do not threaten or impair the health of the US industry and economy”, added the EU executive.

The imposition of restrictive measures, however, would undermine that growth. The EU estimates the impact on US GDP could go by up to $13-14 billion.

Trump threatens 20% levy on all European cars

US President Donald Trump threatened on Friday (22 June) to impose a 20% import tariff on all cars manufactured in the EU if recent sanctions the bloc slapped on Washington are not “broken down and removed”, continuing the tit for tat trade war with America’s nominal allies.

The EU has also requested to participate in the public hearing to be held by the Department of Commerce on 19 and 20 July.

Later this month, European Commission President Jean-Claude Juncker is expected to travel to Washington for talks with the Trump administration aimed at halting the increasing tension between the US and the EU on trade issues.

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