US and EU tariff war threatens the automotive industry

4 July 2018

German vehicle manufacturers are willing to abandon car tariffs between the EU and the US in exchange for President Trump dropping a 25% border tax threat on EU vehicle imports.

Automakers support the EU’s 10% tax on imports from the US and a 2.5% duty on auto imports going away if Trump backs down on his demands for a 25% tariff on incoming vehicles. Recently, the US President has stated he will bring such measures to secure the country’s industry.

Carmakers also want to remove a 25% tax on imports of pickups, crossovers, SUVs and big vans, according to reports in The Wall Street Journal.

New 25% tariffs on imported steel and 10% tariffs on imported aluminium recently went into effect, impacting the EU as well as Canada and Mexico.

The European Union, meanwhile, has begun charging import duties of 25% on a range of US products, in response to US tariffs imposed on EU steel and aluminium early this month, the European Commission said. It is expected to cover around €2.8 billion worth of goods.

′We did everything we could to avoid this situation, but now we have no choice but to respond,’ said EU Trade Commissioner Cecilia Malmstrom. ′It is frankly ridiculous that EU steel is considered a threat to US national security. As longstanding allies of the US, we were disappointed, but not surprised.’

The European Automobile Manufacturers’ Association (ACEA) has expressed its concern regarding the initiation of the investigation.

However, in an increasingly tit-for-tat war, Trump has threatened to impose a 20% tariff on all EU-assembled cars imported into the US, a month after his administration announced an investigation into whether such imports pose a ′threat to national security’.

′If these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US build them here!’ The President wrote on Twitter. 

How such a threat would be executed without violating World Trade Organisation rules is unclear. The US Commerce Department aims to wrap up its investigation into whether imports of automobiles and vehicle parts pose a risk to national security by the end of July or early August, Commerce Secretary Wilbur Ross has stated.

Additional tariffs are expected to be placed on imports from China to the US. This could threaten manufacturers, with Daimler saying that profit will suffer as exports from its Alabama factory to China will likely be lower than the 60,000 vehicles it had expected this year. BMW, America’s top auto exporter, is another company under threat due to its crossover plant in South Carolina.