Published: Tue, July 03, 2018
Money | By Wilma Wheeler

EU Warns US Against Car Tariffs

EU Warns US Against Car Tariffs

"The FTSE 100 was down 1.2pc at 7548 points and the Eurozone-wide Stoxx 50 fell 1.4pc after US President Donald Trump suggested on Saturday that the European Union was possibly as bad as China, only smaller", when it comes to trade.

Speaking to host Maria Bartiromo on Sunday Morning Futures, Trump said this when asked if he'd consider working with US allies to combat China's trade policies: "The European Union is possibly as bad as China, just smaller".

Brussels delivered the threat amid growing fears of an escalating trade war, as the United States president targets the bloc and others, including China, as part of a campaign to protect U.S. jobs.

At Trump's insistence, Canada, Mexico and the US are renegotiating the North American Free Trade Agreement (NAFTA).

In a submission to the U.S. authorities, the European Commission warned: "Economic analysis confirms that an increased tariff on these products (cars and vehicle parts) will be harmful first and foremost for the USA economy". It said that vehicle imports from Europe to the USA had grown at the same pace as demand from the U.S. market, showing that they were filling a gap that domestic output could not, rather than eating into domestic sales as Trump has suggested. In all fairness, they have their farmers, so they want to protect their farmers.

The new European Union tariffs came in retaliation to U.S. taxes on imported steel and aluminum, enacted earlier this year. China is preparing to hit the US with tariffs on products worth $34 billion, and Canada is throwing duties on USA products of around $12.5 billion.

In the interview the president again complained about Canada's protected dairy industry, saying "that's not fair".

The 25 percent import tax could push the synthesiser company outside the US.

Trump on Wednesday said he supported tougher restrictions on foreign investment in sensitive technology, as well as export controls on those goods, but he stopped short of imposing specific restrictions on China.

The tariffs, implemented by the Trump government, have been put in place to reduce their multi-billion dollar trade deficit with China.

"You saw some of the more tariff-sensitive stocks a little bit weaker on the opening", said JJ Kinahan, chief market strategist for TD Ameritrade. "The procurement of military vehicles, e.g. the Mine Resistant Ambush Protected (MRAPs), is limited to a small group of defense contractors producing highly specialized vehicles for military purposes at a cost that would be far beyond the means of the average middle-class US household".

The impact of retaliatory measures by Washington's trading partners could total around $294 billion - or around 19 percent of total US exports in 2017, the European Union estimates. Those tariffs are due to take effect July 6.

"Combined with the other trade actions now being pursued by the U.S. Government-namely the 232 Steel and Aluminum tariffs and the Section 301 tariffs against Chinese imports-the threat of additional tariffs on automobile imports could be detrimental to our company", GM said.

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