Trump threatens stiff tax on European carmakers

President Donald Trump on Saturday threatened to hammer European automotive companies with steep tariffs as his global trade war snowballed into a third day.

Trump, in a series of Twitter posts, while at his Mar-a-Lago resort in Florida, appeared to be responding to warnings from European leaders that his promised tariffs on aluminium and steel would trigger retaliation from numerous major US trading partners.

Bring it on, Trump wrote.

"If the E.U. wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US They make it impossible for our cars (and more) to sell there. Big trade imbalance!" Trump tweeted Saturday.

We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!

— Donald J. Trump (@realDonaldTrump) March 2, 2018

The US imposes a 2.5 percent tariff on the import of foreign cars and a 25 percent tariff on the import of foreign trucks and commercial vans. The European Union charges a 10 percent tariff on the import of cars.

On Thursday, Trump shocked the world - and many of his top advisers - with an off-the-cuff announcement that the United States would impose a tariff of 25 percent on steel imports and 10 percent on aluminium imports. Canada's leadership said they would retaliate with tariffs on US exports. European Commission president Jean-Claude Juncker said his bloc planned to hit back at the US by imposing tariffs on targeting Kentucky bourbon, Harley-Davidson motorcycles, and Levi's blue jeans.

On Friday, Trump wrote in another Twitter post that "trade wars are good, and easy to win." He also promised to enact what he called "RECIPROCAL TAXES" on any country that has a tariff against any US good or service.

Trump's message on Saturday continued to levy direct attacks at US allies and some of the world's largest economies. The tariffs on aluminium and steel and large tariffs on European automakers would have the biggest impact on Canada, the United Kingdom, Germany, South Korea, Turkey, and Japan, countries which the US has extremely close national security ties.

During the 2016 campaign, Trump often said he planned to use the White House to focus squarely on what he viewed as trade imbalances caused by China and Mexico, but the moves he's threatened in the past week would likely have little impact on them. China has dramatically ramped up production of aluminium and steel in the past 20 years, leading to a glut of both metals that have hurt US companies. But they don't account for a large share of US imports in these metals, making it more difficult for the White House to impose direct penalties. Instead, the largest exporters of steel to the US are Canada, Germany, South Korea, and other top allies.

On Friday, Canadian Prime Minister Justin Trudeau called the tariff proposal "absolutely unacceptable," using the same phrase as Foreign Minister Chrystia Freeland, who also threatened retaliatory measures if Canada isn't exempted from the trade actions.

Trump's new attack on European automakers is mostly a direct threat at Germany, which exported $23 billion in cars to the United States in 2016, according to data aggregated by the Massachusetts Institute of Technology. But large German automakers also have a sizable presence in the United States, with BMW employing thousands of workers in South Carolina and Volkswagen employing thousands more in Tennessee. Those manufacturers produce hundreds of thousands of cars in the United States each year, many of which are later exported to buyers in Asia and Europe.

Trump often looks at trade relationships as a zero-sum game, complaining if the United States buys more goods and services from other countries than it sells to them. To that end, US firms sold $53 billion in exports and imported $118 billion in goods from Germany last year, the kind of dynamic that he has often complained about.

But critics of Trump's approach have often complained that tariffs and trade wars only drive up costs for domestic consumers, a move that would make German cars more expensive for US consumers. Trump has also said these sorts of threats could incentivize foreign companies to expand their US operations so they don't have to pay the import fees.

Trump has been hammering the German auto industry since before taking office, incensed at their move to expand production in Mexico and threatening them with a 35 percent tariff on any cars brought into the United States.

One of Trump's top advisers, Peter Navarro, also holds the view that German automakers have stolen market share in the US by importing cars but limiting the amount of US cars sold into their country, two people involved in White House deliberations said. Navarro's stature within the White House has grown in recent weeks as Trump has turned towards advisers with protectionist views as he became frustrated that his trade agenda was floundering.

German officials have spent much of the past year trying to convince US policymakers that they have a healthy trade relationship in the US that benefits both countries. But Trump has a frosty relationship with German Chancellor Angela Merkel, and these personal relationships can spill into policy decisions at the White House.

White House officials have even discussed launching what's known as a "301 investigation" into German automakers, a step that could preclude levying tariffs or other restrictions, a person familiar with discussions said.