Trump tariff threat on European cars escalates global trade war

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US President Donald Trump has threatened to impose a 20% tariff on all EU-assembled cars coming into the US, a month after the administration launched an investigation into whether automotive imports pose a national security threat.

On Friday, the European Union invoked what it called "rebalancing measures" - raising duties on US steel and aluminum products, agricultural goods and other products - in response to USA global tariffs on steel and aluminum imports.

The goods targeted include typical American products such as bourbon, peanut butter and orange juice, as well as iconic Harley Davidson motorbikes, in a way that seems designed to create political pressure on US President Donald Trump and senior US politicians.

The latest threat came the same day that European Union placed tariffs on us products ranging from orange juice to vodka, retaliation for Trump tariffs earlier this year on aluminum and steel.

Mr Trump launched the investigation last month, ordering the Commerce Department to determine if vehicle imports are a risk to national security.

At present, the United States imposes a 2.5 percent tariff on passenger cars imported from the European Union, while the 28-nation bloc slaps a 10 percent duty on imported American cars.

Given his Friday tweet renewing the threat of a 20% Trump tariff, it seems safe to say that the president didn't appreciate the German offer and has no intention of opening up the U.S.to stiffer light-truck import competition.

German vehicle makers Volkswagen, Daimler and BMW build vehicles at plants in the US.

"Build them here!" he added.

President Trump late on Monday threatened to impose a 10 percent tariff on $200 billion of Chinese goods, escalating a tit-for-tat trade war with Beijing.

An escalation in the trade dispute would hit Germany especially hard, as it ships about 600,000 cars to the United States every year, Mr Arndt Ellinghorst, a London-based analyst at Evercore ISI, said in a note to clients. According to the Peterson Institute for International Economics, a 25% tariff on imported autos to the U.S. would result in the loss of 195,000 United States auto workers' jobs.

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The Washington, D.C. -based Alliance of Automobile Manufacturers, which represents automakers on policy issues, said Friday that it opposes increased tariffs.

European Union trade officials have described the United States tariffs on steel and aluminum - justified by the Trump administration on grounds of national security -- as "illegal". "Excluding agricultural products (generally more highly protected), the USA tariffs are similar to those from Canada and the European Union, and higher than in Japan".

Mr Trump's comment came amid a U.S. national security probe of auto imports. Germany is the largest European manufacturer of automobiles, though German companies have a huge presence in the United States, with large factories in SC and Tennessee.

The U.S.is scheduled to start taxing more than $30 billion in Chinese imports in two weeks.

The new European Union tariffs are meant to retaliate for Trump's steel and aluminum tariffs, which European Union leaders have declared illegal on numerous occasions and are contesting before the World Trade Organization.

"So, they're basically saying, 'We are going to sell you millions of cars".

The Australian dollar sank to a one-year low of A$ 0.7391 as the U.S.

German automakers are reportedly poised to support ending all auto tariffs between Europe and the U.S. To be sure, BMW, Mercedes and Volkswagen all operate U.S. plants.

"No, because the U.S. is both an important export market and a strong production base for us", Mattes said.

"It wouldn't take that much for financial markets to combine with businesses that are waiting to turn this into a big global event". A group representing major United States and foreign vehicle makers has said it was "confident that vehicle imports do not pose a national security risk".

But the administration's insistence that the U.S. was hit with disproportionate tariffs from key trading partners "is simply not true", wrote Gregory Daco, head of U.S. Economics at Oxford Economics, in a research note.

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