The EU made its comments in documents submitted to the US Commerce Department as part of that country’s continuing Section 232 national security investigation into imports of cars, sports utility vehicles (SUVs), vans, light trucks and automotive parts.
EU-operated companies produced almost 2.9 million vehicles in the US in 2017, representing 26% of the latter’s domestic production for the year. And 60% of cars made in the US by such EU-owned companies were exported to nations that included some in Europe. The EU said that this contributes to improving the US balance of trade.
The new tariffs, if they were imposed, would mean that “US costs would rise, US automobile exports would suffer, US consumers would pay higher prices and jobs would be lost,” the EU said. “Measures would, in effect, constitute a tax on the American people without resulting in a more competitive or innovative sector in the US.”
The EU’s internal analysis showed that an additional import tariff of 25% applied to cars and automotive parts would have a $13-14 billion-per-year negative effect on US gross domestic product (GDP).
Early studies by the EU, based on experience gained during the US’ Section 232 investigations into steel and aluminium imports, indicate that as much as $294 billion worth of US exports – the scope of products under the current investigation and a sum equal to 19% of total US exports in 2017 – could be subject to countermeasures across sectors of the US economy. This would further amplify the negative effect on US GDP.
“This development harms trade, growth and jobs [both] in the US and abroad, weakens the bonds with friends and allies and shifts attention away from the shared strategic challenges that genuinely threaten the market-based Western economic model,” the EU added.
The Commerce Department should take into account what commensurate counterbalancing measures might be taken by other member nations of the World Trade Organization (WTO) against their imports from the US, the EU said. This could involve a volume of trade that is roughly six times larger than has been the case for steel and aluminium.
The EU went on to caution the US against pursuing a process that could result in what the EU alleged would be yet another flouting of international law, which would further damage the reputation of the US and which the international community could not and would not accept.
It also took the view, as it did with the Section 232 import tariffs on steel and aluminium, that the current investigation lacks legitimacy and any factual basis, and violates international trade rules.
These suggested new tariffs could be a “severe double-threat” to the EU steel sector, according to European steel association Eurofer, which called for “robust” safeguard measures to be applied.
“The tariffs on EU cars [proposed by US President Donald Trump] represent a worrying escalation of the brewing trade war between the US and its global trading partners,” a Eurofer spokesman said.
“EU car producers export vehicles to the US made primarily with high-quality European steel. Given the punitive tariffs already in place on EU steel, if the EU loses access to an important vehicular market that uses EU steel, this could be a severe double threat to the EU steel sector,” he added.
“Eurofer calls on the EU and [other] member states [of the WTO] to ensure that the steel industry has a robust safeguard in place to defend the sector against surges of imports and to react in a measured and proportional way to the threat of further US trade action,” he said.
The monthly average of Metal Bulletin’s assessment of domestic hot-dipped galvanized coil in northern Europe, a material that is widely used in car manufacturing, fell month on month to €657.60 per tonne ex-works in June. It had peaked at €690 per tonne ex-works in March.