EU submission suggests US industry would be harmed if tariffs imposed

24 January 2019

The European Commission has warned the US that imposing import tariffs on cars and vehicle parts would harm its own industry and lead to countermeasures by trading partners on $294 billion (€259 billion) of US exports.

In a ten-page submission sent to the US Commerce Department last week, the EU said any tariffs levied in these areas were unjustifiable and would not make economic sense.

The Commerce Department launched its investigation on the grounds of ′national security’ in May last year under instruction from President Donald Trump. Trump has criticised the EU over its trade surplus with the US and for having higher import duties on cars. Europe has a 10% levy, compared to 2.5% for cars entering the US.

Trump mentioned earlier in the month that the Government was completing its study and suggested the country would take action soon, having previously threatened to impose a 20% tariff on all cars shipped from the EU.

The bloc exported €37.4 billion of cars to the U.S. in 2017, while €6.2 billion worth of cars went the other way.

The EU says that for some goods, such as trucks, US import duties are higher.

In its submission, the EU said that companies in the bloc make close to 2.9 million cars in the US, supporting 120,000 jobs – or 420,000 if dealerships and parts retailers are included. Imports had not shown any large increase over the last few years and had largely grown alongside the expansion of the US car market, with increasing demand unable to be met by domestic production.

The EU submission said that tariffs on cars and car parts could undermine US vehicle production by imposing higher costs on domestic manufacturers. The EU has calculated that a 25% tariff would have an initial $13 billion-$14 billion (€11 billion-€12 billion) negative impact on US gross domestic product with no improvement to its current account balance.

Assuming countermeasures along the lines of those taken in response to existing US import tariffs on steel and aluminium, up to $294 billion (€259 billion) of exports, or 19% of the country’s overall overseas trade, could be affected, the submission said.

The submission also said that the link between the automotive industry and national security was “weak.” Military vehicles, such as the Humvee, were made by different, more niche producers.

President Trump has previously clashed with the EU over tariffs on manufacturing materials. Steel and aluminium were targeted specifically, which provoked a strong reaction from EU officials and European manufacturers.

′Everybody would lose,’ Volvo CEO Hakan Samuelsson said. ′This includes Volvo because our whole system is based on free trade. And the consumers would lose out because they will have more expensive goods, including cars.’