Don't Think We Won't Fire Back, EU Warns U.S. After White House Receives Key Auto Import Report

The showdown between the European Union and United States over auto tariffs reminds this viewer of Charles Bronson and Henry Fonda in Once Upon a Time in the West, and with good reason. Both players appear ready to reach for their Colt Single Action Army in a bid to do maximum damage to the other.

After the U.S. Commerce Department delivered a confidential report to the White House on Sunday, the EU is warning its trading partner that any tariffs imposed on European-built vehicles will be met with similar levies on American goods.

The Commerce Department is tasked with advising President Donald Trump on how to proceed on the issue of new auto tariffs. Repeatedly, Trump has floated the idea of steep tariffs on Euro vehicle imports as a way of bolstering U.S. manufacturing, jobs, and foreign investment.

In this scenario, the president would use Section 232 of the Trade Expansion Act of 1962 to levy the tariffs. Section 232 gives a leader the ability to impose import duties on certain products and commodities to protect the nation’s national security. The Commerce Department report, which Trump will have 90 days to review, either provides the go-ahead, or tells the president to pull a U-turn on tariffs.

European automakers fear the report contains recommendations for tariffs of 20 to 25 percent on their region’s vehicles. For its part, the domestic industry doesn’t like sitting on pins and needles.

In a statement reported by Reuters, the Motor and Equipment Manufacturers Association said, “Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs.”

“It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers, and trigger a reduction in U.S. investments that could set us back decades,” the association continued.

Several foreign automakers bashed the proposal last year, claiming that such a move would add significantly to vehicle prices, even on those built in the United States.

Should the U.S. levy tariffs on imported European-built vehicles and auto parts, the EU will “react in a swift and adequate manner,” said Margaritis Schinas, a spokesman for the European Commission, on Monday. Germany stands to be hit the hardest if this comes to pass. In preparation for a U.S. tariff, the EU has ammo in its chamber: $23 billion in U.S. goods earmarked for EU-imposed tariffs.

While Trump shelved his tariff talk last year as the U.S. and EU proceeded with trade negotiations, the Commerce Department report has brought old fears to the forefront. Speaking to the terms of the earlier ceasefire, the EU claimed Monday it would “stick to its word as long as the U.S. does the same,” Bloomberg reports.

[Source: Bloomberg] [Image: Daimler AG]