US President Donald Trump has drawn a bead on European car makers, saying he intends to impose tariffs on their exports to the US if the EU retaliated against his proposed steel and aluminium tariffs.
Trump, who campaigned on a platform of putting America first, called for tariffs of 25 percent on steel imports and 10 percent on aluminium products on Thursday. His hope was that this protectionist move would bolster these industries.
The EU responded in kind, with European Commission president Jean-Claude Juncker telling German television that the Union would not “put our head in the sand”. The response was bullish and anything but conciliatory. “We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levis,” Juncker said on Friday.
The European Commission said this week that it would formally announce details of policies targeting the US “in the next few days” to “rebalance” the global trade playing field after Mr Trump’s move.
Mr Trump tweeted at the weekend that trade wars were “good, and easy to win”, stating that "If the EU 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," he wrote. "They make it impossible for our cars (and more) to sell there."
The US president’s assault on European automakers has been a long time coming. He has frequently grumbled about the trade deficit between the US and Germany, which exported $US23 billion in cars to the US in 2016, according to Massachusetts Institute of Technology figures. The problem he faces is that the big three German manufactures – Volkswagen Group, Mercedes-Benz and BMW – all have a significant manufacturing presence in the US, with more than 100,000 people employed in the factories and second tier industries, often in southern, Trump-supporting states. The increasing attractiveness of Mexican car plants to German marques has also proved a persistent irritant to the Trump administration.
The tariff proposal will have an "immediate disruption effect" and will be detrimental to the US economy, claimed economist Robert Shiller. The 2013 Nobel Prize for Economics winner said: "I'd wonder if this isn't just a first step, that Trump has in mind raising other tariffs. Even if he doesn't there will be other countries who will retaliate and they'll get bigger. This is really like a first shot in a war and that's what is worrisome.” He then added a note of worrying perspective. “That's what happened in the Great Depression."