European car imports endanger US national security

The Financial Times
European car imports endanger US national security

The EU has threatened retaliation if Donald Trump imposes punitive import tariffs on European cars, based on the findings of an investigation into whether they pose a threat to US national security. The Financial Times reports in its article EU threatens retaliation if US imposes punitive car tariffs that Margaritis Schinas, European Commission spokesperson, said Brussels was aware that the US commerce department had concluded its probe and handed its findings to President Trump.

“Were this report to translate into actions detrimental to European exports, the European Commission would react in a swift and adequate manner,” he told reporters on Monday.

Mr Schinas said the report had not been made public and he refused to speculate on its contents.

But German chancellor Angela Merkel’s spokesman Steffen Seibert said: “From what we’ve heard, [it] does conclude that European car imports constitute a threat to US national security.”

He called for the issue to be resolved through negotiations, saying “that is in our view the right way”, referring to ongoing trade talks between the US and European Commission.

Wilbur Ross, the US commerce secretary, on Sunday submitted his recommendations to Mr Trump, who now has 90 days to decide whether to act on the findings. The US president has previously threatened levies of as much as 25 per cent on foreign-made vehicles.

If Mr Trump acts on this threat, Germany’s car industry would be the main casualty. A report last week by the influential Ifo institute in Munich said German car exports to the US would halve long-term if 25 per cent import tariffs were imposed.

“These tariffs would reduce total German car exports by 7.7 per cent, or by €18.4bn,” said Gabriel Felbermayr, head of Ifo’s centre for foreign trade, adding that value creation in the German car industry would fall by €7bn, or about 5 per cent. About 60 per cent of the total damage inflicted on the European car industry by such tariffs would be felt by Germany, Mr Felbermayr said.

Ms Merkel addressed the issue in a speech at the Munich Security Conference on Saturday. The chancellor said many of the German cars sold in the American market were actually built in factories in the US, noting that BMW’s largest plant was not in Bavaria, its home, but in Spartanburg, South Carolina.

“If such cars . . . are suddenly a threat to US national security then I find that shocking,” she said.

Mr Trump has threatened tariffs on EU cars before, but backed off after talks with European Commission president Jean-Claude Juncker in Washington in July. The two agreed to discuss how to reduce tariffs and other trade barriers relating to industrial goods other than cars, and to mount a joint push to reform the World Trade Organization. The deal between the two put car tariffs on hold while talks on a trade agreement proceeded. But progress on such an accord has been slow.

On Monday Mr Schinas said the commission was “committed to the implementation of a positive trade agenda”, as agreed by Mr Trump and Mr Juncker last year. “We agreed that both the EU and the US would refrain from taking any measures that would go against both the letter and the spirit of the joint statement,” he said. “President Juncker trusts President Trump’s word. The EU will stick to its word as long the US does the same.

But the EU is preparing retaliatory tariffs totalling €20bn of US goods if Mr Trump acts on his threat. The BDI, the main German business lobby organisation, called on the US commerce department’s report to be published quickly “so as not to increase companies’ uncertainty even further”. “There is no way that car imports endanger the US’s national security,” it said. The organisation called on Mr Trump “to stick to the current laws of trade” and refrain from introducing tariffs or quotas.