Autos Group Warns Trump on EU Tariffs

A leading auto industry group in the European Union (EU) warned President Donald Trump that American manufacturers will also suffer from his planned 25 percent tariff on the sector.

Trump said on Wednesday that the tariff, which is to take effect after April 2, will apply to all cars not made in the U.S. It will also include auto parts.

The European Automobile Manufacturers' Association (ACEA), which represents 16 of Europe's largest vehicle makers, said in a statement it was "deeply concerned" by the tariff news, and urged the U.S. and EU to find an "immediate resolution."

Why It Matters

Trump wants to protect domestic manufacturing and jobs from what he sees as unfair global competition from the EU and other trading partners. He hopes tariffs will draw more investment into the U.S. or force better trade terms for American businesses.

However, his tariffs are unsettling global markets, which fear a trade war will harm growth, push business costs much higher and trigger a recession.

What to Know

"European automakers have been investing in the U.S. for decades, creating jobs, fostering economic growth in local communities, and generating massive tax revenue for the US government," said ACEA Director General Sigrid de Vries on Thursday morning.

"We urge President Trump to consider the negative impact of tariffs not only on global automakers but on U.S. domestic manufacturing as well.

"Tariffs will not just impact imports into the U.S., a penalty that American consumers are likely to pay, but measures on automotive parts will also hurt auto makers producing cars in the U.S. for export markets.

"European manufacturers export between 50 percent and 60 percent of the vehicles they make in the U.S., making a substantial positive contribution to the U.S. trade balance.

"The EU and the U.S. must engage in dialogue to find an immediate resolution to avert tariffs and the damaging consequences of a trade war."

What People Are Saying

Announcing the 25 percent autos tariff at the White House, Trump called it the "beginning of liberation day in America" and said it would lead to "tremendous growth in the automobile industry".

"We're going to take back just some of the money that has been taken from us," Trump said, calling the tariff "very modest" and saying businesses have been returning to the U.S. as a consequence of his trade moves.

Investment analysts at Wedbush wrote in a note: "In our view these initial tariffs (if they hold in their current form) would be a hurricane-like headwind to foreign (and many U.S.) automakers and ultimately push the average price of cars up $5k to $10k depending on the make/model/price point.

"We continue to believe this is some form of negotiation and these tariffs could change by the week although this initial 25 percent tariff on autos from outside the U.S. is almost an untenable head scratching number for the U.S. consumer.

"We expect to learn more over the next week but for now investors will be frustrated by this announcement with few details...as this tariff announcement/25 percent number is hard to digest."

What's Next

The autos tariff and many more are due to come in from the start of April under what the Trump administration is calling a "reciprocal" policy that aims to equalize trade terms across the world.

But Trump has signaled some flexibility in recent days, suggesting that there may be deals to make for U.S. trading partners who want to avoid the tariffs, so further horse-trading is expected in the coming days and weeks.