Trump Threatens to Tax European Car Imports

03/03/18 04:10 PM EST
By William Mauldin and Rebecca Ballhaus 

President Donald Trump upped the ante in a brewing trade conflict stirred up by his announcement of steel and aluminum tariffs, saying the U.S. would impose tariffs on European car exports if the bloc follows through with retaliation against his metals duties.

"If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.," Mr. Trump wrote on Twitter from Palm Beach, Fla. "They make it impossible for our cars (and more) to sell there. Big trade imbalance!"

Imposing a tax on the imports of European cars would be more difficult than Mr. Trump's tweet suggests. European auto makers employ thousands of workers in the U.S. and have factories in states including Alabama, South Carolina and Texas. BMW manufactures sport-utility vehicles in South Carolina and exports at least 70% of them to other countries.

The exchange began Thursday after Mr. Trump said his administration would enact in coming days a law to impose 25% tariffs on imported steel, with 10% targeting imported aluminum, on national-security grounds. Some economists are worried tariffs applied unilaterally rather than through the World Trade Organization will generate a series of reprisals that could end in a trade war.

The European Union's executive arm responded on Friday that it would retaliate against any metals tariffs, saying it had put together a package of penalties that would affect a total of $3.5 billion in U.S. exports, including Harley-Davidson motorcycles, bourbon and bluejeans.

Promising to "defend European jobs," European Commission President Jean-Claude Juncker said "we that we also take measures." He added: "I don't like to use the word trade war, but I can't say how this wouldn't be warlike behavior."

The EU's retaliatory tariffs, if implemented, would hit quintessentially American exports, as well as making a political impact in Kentucky, the home state of Senate Majority Leader Mitch McConnell, and Wisconsin, the state that's home to House Speaker Paul Ryan and motorcycle maker Harley-Davidson.

Mr. Trump's warning on Saturday, if pursued, would ratchet up pressure further, targeting automobiles, which are responsible for a significant percentage of world trade. The U.S. imported $20.5 billion in German passenger cars in 2017. The U.S. charges tariffs of 2.5% on most cars from countries with which it doesn't have a free-trade agreement, and 25% on pickup trucks. The EU has a tariff of 10% on car imports under WTO rules.

Mr. Trump on Saturday also criticized the global goods deficit of more than $800 billion that the U.S. ran up last year, faulting the nation's "very stupid" trade deals. "Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been," wrote Mr. Trump, who has been president for nearly 14 months. "No more!"

The Obama administration had prioritized negotiations on a free-trade agreement with the EU, but those talks have languished since Mr. Trump took office and political opposition rose in some European countries.

Some U.S. partner countries are seeking to be excluded from any steel and aluminum tariffs the U.S. imposes, saying their shipments help rather than hinder national security. But a White House official said Friday that countries shouldn't expect exemptions.

It remains unclear which countries may be hit by the metals tariffs. The president said he would provide more details next week.

Mr. Trump has raised the prospect of taxing European cars before. In January 2017, he threatened impose a 35% import tariff on exports by German auto companies from Mexican plants to the U.S., singling out BMW AG, the Munich-based maker of luxury sedans and sport-utility vehicles.

"I would tell BMW if they want to build cars in Mexico and sell in the U.S.A. without a 35% tax, they can forget it," he said. Shares in BMW, along with Daimler AG and Volkswagen AG, fell in the wake of Mr. Trump's comments.

Mr. Trump didn't follow through on that threat.


(END) Dow Jones Newswires

March 03, 2018 16:10 ET (21:10 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.