EU warns US of counter-steps if car tariffs imposed

Tom Donohue

BRUSSELS, July 02 (Reuters): The European Union (EU) has informed the United States that imposing import tariffs on cars and car parts would harm its own automotive industry. The EU warned US that its trading partners may take counter-measures on $294 billion of US exports.In a 10-page submission to the United States Commerce Department sent last Friday, the European Union said tariffs on cars and car parts were unjustifiable and did not make economic sense.

The Commerce Department launched its investigation, on grounds of national security, on May 23 under instruction from President Donald Trump.

Trump has repeatedly criticised the EU over its trade surplus with the United States and for having higher import duties on cars. The EU has a 10 per cent levy, compared to 2.5 per cent for cars entering the United States.

Trump said last week that the government was completing its study and suggested the United States would take action soon, having earlier threatened to impose a 20 per cent tariff on all EU-assembled cars.

The bloc exported 37.4 billion euros ($43.6 billion) of cars to the United States in 2017, while 6.2 billion euros worth of cars went the other way.

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

In its submission, the EU said that EU companies make close to 2.9 million cars in the United States, supporting 120,000 jobs - or 420,000 if cars dealerships and car parts retailers are included.

Imports had, it said, not shown a dramatic increase in recent years and largely grown alongside overall expansion of the US car market, with increased demand that could not be met by domestic production.

The submission said that tariffs on cars and car parts could undermine US auto production by imposing higher costs on US manufacturers.

The EU had calculated that a 25 per cent tariff would have a initial $13-14 billion negative impact on US gross domestic product with no improvement to its current account balance

Assuming counter-measures along the lines of those taken in response to existing US import tariffs on steel and aluminium, up to $294 billion of US exports - 19 per cent of overall US exports - 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.

Meanwhile, the US Chamber of Commerce, the nation's largest business group and customarily a close ally of President Donald Trump's Republican Party, is launching a campaign on Monday to oppose Trump's trade tariff policies.

With some of America's tightest trading partners imposing retaliatory measures, Trump's approach to tariffs has unsettled financial markets and strained relations between the White House and the Chamber.

The new campaign, detailed first to Reuters, is an aggressive effort by the business lobbying giant.

Using a state-by-state analysis, it argues that Trump is risking a global trade war that will hit the wallets of US consumers.

"The administration is threatening to undermine the economic progress it worked so hard to achieve," said Chamber President Tom Donohue in a statement to Reuters. "We should seek free and fair trade, but this is just not the way to do it."

The Chamber, which has three million members, historically has worked closely with Republican presidents and praised Trump for signing business tax cuts in December.