The European Commission has warned the United States that imposing tariffs on European cars “will be harmful first and foremost for the US economy.”
The Commissions warning was part of a response — seen by POLITICO Brussels Playbook — to a U.S. request for comment on the issue. The response was dated last Friday and sent to the U.S. Commerce Departments Bureau of Industry and Security.
The 11-page document states that the EUs internal analysis “shows that an additional import tariff of 25 percent, applied to automobiles and automotive parts, would in first instance have a negative impact on US GDP in the order of 13-14 billion USD, and the current account balance of the US would be not affected positively.”
U.S. President Donald Trump recently threatened to hit imports of European cars with a 20 percent tariff if Brussels doesnt remove tariffs and other trade barriers in an escalating row.
European carmakers produced 2.9 million vehicles, or 26 percent of American car production, in the U.S. last year, according to the document. Even without Chrysler — which is, as the Commission notes, “one of the traditional US big three manufacturers” but is now of “European ownership” — production by EU-owned companies in the U.S. “still amounts to 16 percent of national production and 1.8 million vehicles.”
The document also reminds Washington that European companies that produce in the U.S. often import needed parts for their American factories, and also export large portions of their final product: “EU companies based in the US export a significant part of their production, thus contributing substantially to improving the US trade balance, which is a priority of the administration,” the paper states.
“Around 60 percent of automobiles produced in the US by companies with exclusive EU ownership are exported to third countries, including the EU. Measures harming these companies would be self-defeating and would weaken the US economy,” the document adds, arguing that cars would become more expensive and harder to sell.
Plus, the Commission says imposing tariffs on European cars could elicit “countermeasures” from the U.S.s other trading partners: “The impact will be aggravated significantly by the likely countermeasures of US trading partners over a significant volume of trade,” the Commission warns.
“Early studies, based on the experience of the steel and aluminium Section 232 investigations, estimate that up to 294 billion USD of US exports … (equal to 19% of US total exports in 2017)could be subject to countermeasures across sectors of the US economy. These would further amplify the negative effect on GDP.”