By Barbara Kollmeyer, MarketWatch
In what could mark a new escalation in trade-war tensions, the European Union threatened fresh tariffs on nearly $300 billion in U.S. products if President Donald Trump follows through with new levies on European car makers.
In a letter sent Friday to the U.S. Department of Commerce, which was seen by the Financial Times , the European Commission warned that Trump could trigger a devastating global trade war with his auto-tariff threats, which they believe he could carry out soon.
While the letter didn’t lay out any specific measures, the EU and other major economies were “likely” to retaliate against a broad swath of U.S. sectors — adding up to tariffs worth as much as $294 billion, it said, according to the FT report Sunday.
Launching a fresh attack on the region, Trump said the EU was “as bad as China” when it comes to taking advantage of the U.S. auto industry, speaking in an interview with Fox News on Sunday. Global stocks picked upon the tensions on Monday, with Dow futures down nearly 150 points and the Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.05% off 0.7%. In Asia, the Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.98% and Japan’s Nikkei 225 indexes /zigman2/quotes/210597971/delayed JP:NIK -0.47% each fell over 2%.
“It is terrible what they did to us. European Union — take a look at the car situation. They send a Mercedes in; we can’t send our cars in,” said Trump in the interview.
That was after Trump on Friday threatened to put 20% tariffs on European cars, in response to the EU’s decision to impose 25% tariffs on more than $3 billion in U.S. goods . That itself was a retaliation to U.S. tariffs on steel and aluminum that the Trump administration put into effect on June 1.
The EU document warned that the tariffs would amount to an “own goal” for the U.S. economy, given the intricate supply chain of that nation’s auto industry, and that they would trigger a $13 billion to $14 billion hit against for U.S. gross domestic product.
Commenting that “cars are the big one,” Trump told Fox that tariff threats against global auto imports were his most effective method of extracting concessions from U.S. trading partners. He was speaking in reference to a study his administration launched into whether they should slap 20% tariffs on imported cars owing to national security concerns.
The EU countered in the document, which was submitted by the region’s Washington representative, that Trump’s security arguments weren’t based on any facts and could undermine the global trade system.
“This development harms trade, growth and jobs in the U.S. and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based western economic model,” the document said.
Moody’s has warned that Trump’s threats of tariffs on global auto imports would disrupt the entire global supply chain and harm car makers, parts makers and U.S. dealers. General Motors Inc. /zigman2/quotes/205226835/composite GM -1.22% warned Friday that U.S. jobs and its own competitiveness were at stake from the tariff threats.