US car tariffs to hit jobs and trade, EU warns

The EU has rebuked the US government's threat to impose extra taxes on imports of cars. Photo / Getty Images

The EU has rebuked the US government's threat to impose extra taxes on imports of cars, saying that such a move "harms trade, growth and jobs in the US and abroad".

The statement formed part of the EU's formal comments to the US Department of Commerce in response to the ongoing investigation into the impact of automotive imports on US national security.

The bloc has also warned that it will impose US$300 billion ($447b) worth of taxes on US products if President Donald Trump presses ahead with plans to hit cars made in the EU with fresh duties.

Trump said on Sunday that the EU represents as great a threat as China to US economic interests, an important degradation in US-EU relations.

The two powers had previously, along with Japan, sought to collaborate on the alleged theft of Western countries' intellectual property by China.

However, the US commerce department is now investigating whether or not it can use national security laws to impose tariffs of 20 per cent on EU car imports.

In the EU's view, this current investigation lacks legitimacy, factual basis and violates international trade rules, just like the similar investigation that led to the imposition of steel and aluminium tariffs earlier this year.

These latest threats are part of a tit-for-tat trade battle emerging between the US and other major economies in what experts fear will become a full-blown trade war.

The conflict threatens to derail global growth, according to major bodies such as the International Monetary Fund.

In its submission, the EU reiterated its firm opposition to the proliferation of measures taken on supposed national security grounds for the purposes of economic protection.

"This development harms trade, growth and jobs in the US 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 EU said.

The EU and the US specialise in largely different market segments, and over the last five years imports from the EU have been stable.

The submission said that while there is no economic threat to the US automobile industry which is healthy, imposing restrictive measures would in fact undermine the current positive trends of the US automobile sector.

According to the EU, car companies from the bloc operate in the US and export about 60 per cent of their US production to other countries, improving the US trade balance and providing 120,000 direct and 420,000 indirect jobs.

Trade restrictions are likely to lead to higher input costs for US-based producers, thus in effect becoming a tax on American consumers, the EU argued.

The impact of potential new US tariffs on imported cars would be "aggravated significantly by the likely countermeasures of US trading partners, as evidenced by the reaction to the US section 232 tariffs on steel and aluminium", the EU said.

The EU has also requested to participate in a public hearing to be held by the US Department of Commerce scheduled for July 19 and 20.

Jean-Claude Juncker and EU trade commissioner Cecilia Malmstrom will visit Mr Trump on "July 24 or later", a spokesman said.

- This story first appeared in the Daily Telegraph and was reproduced with their permission