EU warns Trump that raised car import tariffs would hurt US

The European Union has claimed that Donald Trump’s plans to impose higher import taxes on cars to the US would harm his own country’s economy.

Trump’s government is threatening to raise tariffs for EU-made cars to 20 percent to 'rebalance' the EU's 10 percent tariff on cars imported into its region. The US's current, long-standing rate stands at 2 percent.

But in a submission sent to the US Department of Commerce, the EU said that such an increase would be to the detriment of the US’s own interests. It said that car imports from Europe to the US had grown at the same pace as demand from the US market, showing that they were filling a gap that domestic output could not, rather than eating into domestic sales as Trump has suggested.

The document also said that European car makers in the US make about 2.9 million cars per year, accounting for 120,000 jobs directly involved in the manufacturing process, or 420,000 jobs if non-direct roles such as car parts production and retailers are included.

In addition, the submission suggested that these roles would be placed under pressure if a tariff raise had the predicted negative impact on supply of vehicles and parts from the EU. It calculated that a 25 percent tariff would slash an initial $13-14 billion (up to Rs 96,331 crore) off US gross domestic product, with no predicted improvements to its own incomes.

Meanwhile, the EU argued that the US’s comparably low car import tariff was countered by higher rates on other vehicles, such as lorries.

If the US government imposes a higher tariff rate, the EU said it would respond — as it did to the recent hike in import costs for steel and aluminium — with its own measures.

Nevertheless, European car makers will be concerned about the uncertainty ahead. The US is a major source of demand for many brands in the EU; the biggest EU car company in the US, the Volkswagen Group, sold 55,786 cars there last month alone. Jaguar Land Rover grew its sales in the US by 9 percent last year to 128,097 units.

Several European car makers already build their vehicles in the US, with the most recent example being the BMW X7, which will be exempt from tariff changes. However, imports still account for the vast majority of European car sales in the US.

Also read: European commissioner: We will react to US auto trade tariff

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