Trump’s tariff threat on European cars escalates global trade tensions

US President Donald Trump said he plans to impose a 20 per cent tariff on all cars imported from the European Union unless the trade bloc “soon” removes import duties and other barriers to US goods, escalating global trade tensions.“Based on the Tariffs and Trade Barriers long placed on the US and it great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US. Build them here!” Trump wrote in a tweet on Friday.Trump’s tweet came hours after the EU imposed tariffs on about US$3.3 billion of American products in response to his barriers to imported aluminium and steel.The European tariffs target politically resonant products, including 25 per cent duties on Harley-Davidson motorcycles, Levi Strauss & Co jeans and bourbon whiskey.The EU measures cover a total of around 200 categories, also including various types of corn, rice, orange juice, cigarettes, cigars, T-shirts, cosmetics, boats and steel.Trump’s salvo against the European car industry threatens to broaden a trade war that he has already sparked with China.The US has pledged to impose 25 per cent tariffs on US$34 billion in Chinese goods on July 6 and China vowed to retaliate in the same amount of US imports.White House trade adviser Peter Navarro. Photo: ReutersThe US may justify the car tariffs on the grounds of national defence, just as it did in March when imposing duties on global imports of steel and aluminium.Trump initially exempted the EU from the metal tariffs but let the temporary reprieve expire after negotiations with the Europeans fell apart.Ric Grenell, the US ambassador to Germany, is in Washington this week seeking a deal on car levies.He spoke to White House trade adviser Peter Navarro, Commerce Secretary Wilbur Ross, US Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin about reducing existing tariffs on cars shipped between the US and Europe to zero.Further ReadingThere is support in the administration and from German carmakers for such an idea but no agreement has been reached yet.The Commerce Department in May started investigating whether imports of cars and light trucks hurt America’s ability to defend itself by eroding the country’s car industry.If the findings show a threat to the US, a 1960s-era trade law gives the president authority to impose import restrictions without congressional approval.Many lawmakers have been critical of Trump’s use of the trade law, which was rarely used before he took office.Ross, during a Senate hearing on Wednesday, faced heated questions from Republican lawmakers who argued there was no merit to claiming car imports threaten the country’s defence capabilities.