European Union Warns $300 Billion In Retaliatory Measures Against US Auto Tariffs

Itsuo InouyeAP Images

The European Union estimates that nearly $300 billion of U.S. exports could suffer from retaliatory actions in response to President Trump’s potential tariffs on car parts and automobiles.

The European Commission made the assertion in a formal report to the U.S. Department of Commerce in response to its ongoing Section 232 National Security Investigation of car imports.

Stating that the Department’s examination lacks legitimacy and contradicts international trade law, the Commission wrote, “the EU reiterates its firm opposition to the proliferation of measures taken on supposed national security grounds for the purposes of economic protection.”

Taxing car imports would cut into the U.S. economy deeper than tariffs on aluminum and steel, the EU commented in the letter sent last Friday and made public on Monday. The Union projects a $13 – $14 billion dent in the U.S. GDP if the administration slaps tariffs on foreign cars. Such a measure could prompt trading partners to retaliate, affecting some $294 billion, or approximately 19 percent, of U.S. exports.

On Sunday, talking to Fox News, Trump likened the EU to China when it comes to adverse trading practices – albeit, on a smaller scale. “They send a Mercedes in, we can’t send our cars in,” the president said.

Trump entertained auto tariffs earlier this year and returned to them in the wake of the EU’s reprisal against the U.S. tariffs on aluminum and steel. He has threatened to place a 20 percent tariff on all European autos shipped to the U.S, CNN Money reported in June. The rhetoric has stoked fears of a trade war, a prospect that pushed stock markets down on Monday morning, The Guardian reported.

Currently, the EU imposes a 10 percent tariff on U.S.-assembled cars, while the U.S. charges a 2.5 percent tariff on cars and a 25 percent tax on vans and pick-ups produced in the bloc.

car manufacture
Featured image credit: Frank AugsteinAP Images

European car manufacturers provide 120,000 direct upstream jobs and 420,000 dealership jobs in the U.S., the EU stated in its formal comments. European auto companies operating in the U.S. export some 60 percent of vehicles from the U.S. to third countries, including EU members, and hence, contribute to improving the U.S. trade balance.

“Trade restrictions are likely to lead to higher input costs for US based producers, thus in effect a tax on the American people,” the EU said.

The EU also argued that its car imports into the U.S. do not threaten national security, which the administration has cited as a justification for erecting trade barriers. Defense-grade machines, such as Light Tactical Vehicles, shape a niche market, largely serviced by U.S.-based suppliers and separate from the international car industry, the EU stated.