Donald Trump’s plan to impose tariffs on European cars would ultimately significantly damage US automotive manufacturers, a European Commission analysis claims.
The paper, published by the EU’s executive on Monday morning, says “likely countermeasures” that would be imposed in retaliation against the US for the new policy could cost the American industry billions.
The EU’s internal analysis “shows that an additional import tariff of 25 per cent, applied to automobiles and automotive parts, would in first instance have a negative impact on US GDP in the order of 13-14 billion USD”.
Mr Trump has threatened to impose tariffs on European cars if the EU does not lift tariffs it imposed on a raft of US goods in retaliation to tariffs Mr Trump imposed on European steel and aluminium.
The US president has in recent months tried to use tariffs to strong-arm allies into giving America more favourable trade terms, but has so far been met with limited success, especially in Europe. The US has also been hit with countermeasure tariffs as the threat of a trade war escalates.
The EU paper is a submission to the US department of commerce and lays out the bloc’s view on the proposal for new tariffs. It notes that complex supply chains in car-making mean some American car factories need to import components from Europe and that US jobs could therefore be hit as a result of the plan.
“EU companies based in the US export a significant part of their production, thus contributing substantially to improving the US trade balance, which is a priority of the administration,” the paper says.
“Around 60 percent of automobiles produced in the US by companies with exclusive EU ownership are exported to third countries, including the EU. Measures harming these companies would be self-defeating and would weaken the US economy.”
The EU warning echoes those of US car manufacturers including General Motors, who have said the trade plan could cost US jobs.
The American manufacturer said at the weekend that the proposed policy “risks undermining GM's competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs” and could invite retaliation by US trading partners.
The US president has said he believes the EU treats the US “very unfairly” and has said he wants to reform global trade rules. EU officials says they are sympathetic to calls for WTO reform but that they will not negotiate while the bloc is being threatened by Mr Trump.
Citing “the car situation”, Mr Trump said on Sunday: “The European Union is possibly as bad as China, just smaller… It is terrible what they do to us.”
New EU tariffs on US goods imposed in response to Mr Trump's steel tariffs now cover products as diverse as whiskey, motorcycles, and playing cards.
Ahead of a Brussels summit for EU leaders last week European Council president Donald Tusk warned member states to prepare for “worst case scenarios” with the new president, while senior officials warned behind the scenes that Mr Trump was a “danger” to Europe.