National News

Escalating trade fight, Trump threatens higher taxes on European cars

Posted March 3, 2018 3:53 p.m. EST
Updated July 13, 2018 11:11 a.m. EDT

WASHINGTON — President Donald Trump warned on Saturday that he would apply higher taxes on imported European cars if the European Union carried through on its threat to retaliate against his proposed stiff new tariffs on steel and aluminum.

“If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.,” Trump wrote on Twitter from Florida, where he was spending part of the weekend. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

It was the latest indication that Trump, despite pressure from foreign allies and U.S. business leaders, is standing by his decision to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from all countries. The action is likely to be signed this week.

After Trump announced the penalties Thursday, E.U. leaders warned that American goods like Kentucky bourbon and Harley-Davidson motorcycles, many of them with roots in the home states of key Republican leaders, would be treated “the same way” if the steel and aluminum tariffs were enforced. Officials from Australia, Canada and other U.S. trade partners also made retaliatory threats.

Trump has long seized on what he perceives as the unfair barriers that U.S. automakers face in exporting their cars, noting that many Mercedes-Benzes can be seen on the streets of New York but few Chevrolets on the streets of European cities.

The European Union levies a 10 percent duty on cars made in the United States, and the United States levies a 2.5 percent duty on cars produced in Europe. While the president threatened unilateral action, his ability to change the tariff, which was decided in complex international negotiations, might be limited without taking the major step of pulling out of the World Trade Organization.

The auto industry is a complex target for the president — European automakers have plants in the United States and employ thousands of Americans, and U.S. automakers do sell large numbers of cars in Europe under brands unfamiliar to Americans. In addition, among some Europeans, American cars are seen as less desirable than those from Europe or Japan.

The Trump administration has been fighting for more trade concessions from its global trade partners, with negotiators in Mexico City hashing out changes to the North American Free Trade Agreement and officials working on modifications to a trade deal with South Korea.

Many economists warn that if Trump’s actions lead to an international trade war, a global recession could follow. Republican lawmakers are worried that such a trade fight would undo the promised economic stimulus from the $1.5 trillion tax cut approved last year and the administration’s deregulation push.

But Trump has continued to pursue the fulfillment of his “America First” campaign promise and his vows to protect struggling U.S. steelmakers, writing on Twitter on Friday that “trade wars are good, and easy to win.”

“The United States has an $800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies,” Trump wrote on Twitter Saturday. “Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!”

The president’s move contradicts the positions of many top economic advisers in the administration, including Gary Cohn, who has lobbied heavily against the tariffs and warned he might resign if they are put into place. Jerome H. Powell, the new Federal Reserve chairman, told Congress on Thursday that “the tariff approach is not the best approach” for trade disputes.