Donald Trump threatens 20% tariff on European Union cars, targeting Germany

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President Donald Trump is threatening to slap a 20 percent tariff on cars from the European Union.

European Union countries retaliatory trade tariffs on a list of United States products, agreed in response to USA tariff hikes on steel and aluminium imports from Canada, the EU, and Mexico, will come into force on Friday, the European Commission announced on Wednesday.

"The basis for future agreements between the European Union and the US must be the rules of the WTO", the German auto industy group VDA said in a statement Thursday.

The imposition of tariffs has raised the specter of a full-blown trade war, which could be costly to consumers, jobs and the global economy. In 2017, 17.2m vehicles were sold in the USA, compared with 15.6m in the EU and European Free Trade Association countries.

Mexico placed tariffs on American products ranging from steel to pork to bourbon two weeks ago.

The EU tariffs came into force just a week after China accused the United States of starting a trade war.

Malmstrom said that "we are left with no other choice". Thus, it's unclear what problem Trump's vehicle tariff is supposed to solve - unless the president believes that auto prices in the US are intolerably low.

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The tariffs, which took effect at midnight (2200 GMT Thursday) according to the EU's official journal, will further fuel jitters on world stock markets that are already alarmed by trade tensions between the United States and China.

But the European Union tariffs also come in addition to a historic decline in transatlantic relations, especially in the aftermath of the Group of Seven summit in Quebec earlier this month, when Trump withdrew the United States from a multilateral communiqué at the last minute.

Brussels imposed the tariffs on consumer goods - created to target producers in Republican states where Trump draws much of his support - from 10pm on Thursday on U.S. goods worth up to €2.8bn (£2.5bn). It is a $241 million measure that matches the amount of steel and aluminum import duty expected to be collected from India by the United States after the Trump administration imposed the measures earlier this year.

Nearly 1 million U.S.jobs are tied directly to auto and parts manufacturing, according to the Bureau of Labor Statistics.

Trump has repeatedly singled out German automotive imports to the USA for criticism. BMW is one of South Carolina's largest employers, with more than 9,000 workers in the state.

Canadian Prime Minister Justin Trudeau this week said the integration of the auto industry in the US and Canada means he has "a hard time accepting that any leader might do the kind of damage to his own auto industry that would happen if he were to bring in such a tariff on Canadian auto manufacturers", Reuters reported.

Sales to the USA fell 10 percent to 494,000 vehicles, while Germany automakers produced 804,000 vehicles in the United States previous year.

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