WASHINGTON (CNN) – President Donald Trump has escalated his threat to apply new tariffs on European autos.
Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European Union, 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 U.S. Build them here!
— Donald J. Trump (@realDonaldTrump) June 22, 2018
The threat came the same day the EU imposed new tariffs on American products, a retaliatory move for the tariffs Trump applied on steel and aluminum. The tweet sent shares of European automakers, including BMW and Volkswagen, lower.
Last month Trump instructed his Commerce Department to begin a national security investigation that would provide the legal underpinning for new tariffs on cars.
He has raged in public and private against trade imbalance, particularly with Germany, as it relates to auto imports. He believes the issue provides a potent selling-point for his political base, which includes white, blue-collar workers who could be energized by the move.
“You look at the European Union — they put up barriers so that we can’t sell our Ford products in, and yet they sell Mercedes and BMW, and the cars come in by the millions, and we hardly tax them at all. They don’t take our cars. And, if they do, the tax is massive,” he said during a campaign rally in Duluth on Wednesday.
“So, they’re basically saying, ‘We are going to sell you millions of cars. By the way, you’re not going to sell us any.’ Not going to work that way anymore, folks. Not going to work that way,” he continued.
Commerce Secretary Wilbur Ross in May launched an investigation into whether auto imports hurt US national security. That investigation is ongoing, but Ross told a conference on Thursday he expects the national security investigation into automobiles to conclude by late July or August. The probe is examining auto imports from all countries, not just from Europe.
“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Ross said in his May statement.
The Section 232 investigation is the same approach the Trump administration took when applying steel and aluminum tariffs earlier this year, citing national security concerns.
The announcement was sharply criticized by parts of the US auto industry, who said the tariffs would raise car prices for Americans.
And it’s likely to further fuel tensions with the European Union. The bloc is already upset over steel and aluminum tariffs and imposed retaliatory tariffs on American exports worth more than $3 billion on Friday. It’s targeting iconic American products such as motorcycles, orange juice, bourbon, and denim, in an attempt to ratchet up pressure on Trump.
European countries have been bracing for this 20% tariff, according to two European officials. The tariffs will likely go into effect in the run-up to the November midterm elections in the US.
The officials have said the Germans have proposed a removal of tariffs between the EU and US and the US is willing to look into this possibility before the tariffs go into effect.
European automakers already make some cars in the United States. BMW has a big plant in Spartanburg, South Carolina, and Mercedes-Benz has a factory in Tuscaloosa County, Alabama.
According to people familiar with the deliberations, US Ambassador to Germany Richard Grenell has met with executives at major German automakers, including BMW, Volkswagen, and Daimler, to discuss Trump’s threat of tariffs. Grenell briefed members of the administration, including trade adviser Peter Navarro, about those conversations at the White House this week.
The auto chiefs were hoping to develop a plan that would scrap all tariffs on auto imports between the US and the European Union and it appeared as if Grenell was on board.
One person familiar with the deliberations suggested Trump’s tweet on Friday was a negotiating ploy to move the idea of scrapping all tariffs further along.
But the compromise is complicated by the fact the German government does not have final say in trade matters. Instead, it would be an issue for the European Commission.
Speaking after Trump again raised the prospect of new auto tariffs, Secretary of State Mike Pompeo insisted: “President Trump’s agenda is the most pro-business, most pro-international trade, of any President in history.”
Pompeo made the comment as part of his prepared remarks at the SelectUSA Investment Summit just outside Washington, where he promoted the United States’ business climate and investment opportunities, saying the country is “truly open for business.”
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