EU car exports threatened with new US import tax

Trump threatens tax on EU car exports © Gage Skidmore
US President Donald Trump © Gage Skidmore

US President Donald Trump has threatened to tax EU car exports into the US, as part of an escalating war of words between the US and the EU over trade tariffs.

A new US tax on imports of EU car exports is the latest in an escalating series of threats by the US and Europe, as the two parties edge towards a potential trade war. Last week, Trump announced plan to impose new import tariffs of 25% on steel and 10% on aluminium, in an attempt to protect US manufacturers.

Those measures were strongly criticised by the International Monetary Fund and the World Trade Organization, and also by European Commission President Jean-Claude Juncker, who argued that the new tariffs would “put thousands of European jobs at risk”.

How has the war of words escalated?

In response to Trump’s announcement, Juncker mooted introducing new taxes on hundreds of iconic US exports worth some $3.5bn (~€2.8bn). Such products would include Levi’s jeans, Harley-Davidson motorcycles, and bourbon whiskey.

Responding to Juncker’s proposed retaliatory measure, Trump threatened to introduce further taxes on imports of EU car exports. On Saturday, he tweeted: “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”.

Will these measures lead to a trade war?

According to the BBC, the US is the largest export market for EU cars, representing one quarter of the total car exports for 2016. These exports, worth around €48bn, were largely produced in Germany, and any increase in tax on importing them into the US could have an enormous impact on both the car industry and the European economy.

The director general of the World Trade Organization, Roberto Azevedo, argued that a trade was is “in no one’s interests” and warned that there would only be losers if the two parties pursue the current course of action.

Further, some lawmakers from Trump’s ruling Republican Party warned that the cost of increased tariffs on EU car exports would be borne by American consumers, and cautioned the president against the proposal.

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