Trump threatens 20% tariffs on all European cars coming into US

China and US trade talks

Trump imposed tariffs of 25 per cent on European Union steel and 10 per cent on aluminum on June 1. The European Union, Canada, Mexico, and India are outraged and have retaliated by imposing tariffs on US goods.

Earlier in the week, news reports emerged that Daimler, which produces Mercedes-Benz autos, and other German automakers were pitching a reciprocal elimination of tariffs.

The European Autos Stocks Index fell sharply after Trump's tweet and was last down 1.25 percent. Shares of USA automakers Ford Motor and General Motors fell immediately after Mr. Trump's tweet but rebounded and closed higher.

"This first set of exclusions confirm what we have said from the beginning - that we are taking a balanced approach that accounts for the needs of downstream industries while also recognizing the threatened impairment of our national security caused by imports", Commerce Secretary Wilbur Ross said in a statement.

But the compromise is complicated by the fact the German government does not have final say in trade matters. "The fundamental reality is that talk is cheap", Navarro had told reporters on a conference call, saying China "may have underestimated the strong resolve of President Donald J. Trump".

The move against China could raise prices for American consumers and businesses and hit global supply chains for industries like carmakers and electronics. "Germans are the world's leaders in the premium market as they hit before American and Japanese cars, and have been evolving fast, with large ranges of products".

Including trade in goods, services and primary income from investments, the USA runs a 12 billion euro surplus with the European Union, according to the memo.

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"The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition, " Trump tweeted earlier this week.

"By linking the threatened imposition of US tariffs to European Union tariffs imposed on USA autos, the President has both short-circuited the 232 process and conclusively undercut the stated national security rationale of that investigation", said Daniel Price, a former senior economic adviser to President George W. Bush. "Automakers support reducing trade barriers across the board and achieving fairness through facilitating rather than inhibiting trade".

Others would be affected, too, including Italian-American automaker Fiat Chrysler, which shipped about 154,000 vehicles from Europe to the U.S.in 2017, according to LMC. Automotive News data shows about 7.2 percent of vehicles sold in the United States through May were assembled in Europe.

In May, the Trump administration floated a 25 percent tariff on auto imports, framing them as a means to ensure the vitality of key USA industries. It has a plant in Chattanooga, Tennessee, but it still imports some models from Germany. He told automakers at a White House meeting in May he was planning tariffs on some imported vehicles.

The tariff proposal has drawn sharp condemnation from Republican lawmakers and business groups.

The organisation estimates that a 25% tariff on foreign vehicles and parts for them, assuming the United States does not grant exemptions to some countries, would lead to the loss of about 195,000 jobs in the US. That said, if the current tough talk on trade translates into thorough tariffs, the USA dollar could ultimately benefit as traders seek out the perceived safety of the world's reserve currency, even if U.S. economic growth takes a hit.

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