Daily Management Review

Major Hit To Be Faced By US If Car Tariffs Is Imposed, Warns EU


Imposing import tariffs on cars and car parts imported from the European Union by the United States would likely result in counter tariffs of American goods worth about $294 billion and would negatively impact its automotive industry, the EU has warned.  
Imposing tariffs on cars and car parts were without any economic sense and were unjustifiable, said the EU in a 10-page submission sent to the United States Commerce Department last Friday.
Following instruction from US President Donald Trump, an investigation of whether the importing of car and car parts into the country from the EU was detrimental to the national security of the country was initiated by the Commerce Department on May 23. Trump has been very critical of the trade surplus that the EU has with the United States and for the RU imposing higher taxes on import of American cars. Compared to 2.5 per cent of import duty on for cars entering the United States, the current levy for cars imported int the EU is 10 per cent.
Suggesting that the US would soon take action, Trump last week had said that the investigation was being completed by the government. Trump had previously suggested imposition of a 20 per cent tariff on import of cars and car parts from the EU.
In 2017, 37.4 billion euros ($43.6 billion) of cars was exported form the EU to the US while the block imported billion euros worth of cars from the US in the same period.
U.S. import duties are higher for some goods, such as trucks, the European Union says.
About 2.9 million cars in the United States is manufactured by EU companies which supports about 120,000 jobs in the country and if the dealerships and car parts retailers are taken into account, that number would reach 420,000, the EU has said in its submission.
The block further said that in recent times, there had not been any notable enhancement in its US exports of EU made cars and the increase has largely been commensurate with the overall growth of the US economy in a manner that was possible to be met with the domestic production ion the US.
U.S. auto production could get undermined because higher costs could be charged on U.S. manufacturers if the US imposes tariffs on cars and car parts, the submission said. according to the calculations of the EU, an initial $13-14 billion negative impact on U.S. gross domestic product would result from a 25 percent tariff and moreover, there would not be much of a significant improvement to the current account balance.
The submission further said that if the threatened counter measures against US car tariffs were combined with the tariffs that the RU plans to impose on US products in retaliation to the existing U.S. import tariffs on steel and aluminum, the total value of the US exports that would come under tariffs would reach $294 billion of U.S. exports which is 19 percent of overall U.S. exports.
There is a ‘weak’ link between the automotive industry and national security, the submission also said.