Germany has said it will “not give in” and that Europe must “react strongly” in the light of US President Donald Trump’s latest 25% tariff on cars and car parts. Germany’s outgoing Chancellor Olaf Scholz said on Thursday, the 27th of March, that the move was wrong and that the US President had chosen a path that would only produce losers, “since tariffs and isolation hurt prosperity, for everyone”, according to Reuters and the British broadcaster BBC.
Trump has threatened to impose “much higher” tariffs if Europe cooperates with Canada to cause what he calls “economic damage” to the US.
The new tariffs on cars will come into force on the 2nd of April, with taxes on companies importing vehicles the following day. Duties on parts will start in May or later.
Shares of car manufacturers from Japan to Germany fell. In the US, General Motors fell by 7% and Ford by more than 2%.
Trump has long claimed that the tariffs are part of an effort to help US manufacturing and has said that if cars are made in America, they will have “absolutely no tariffs”.
Tariffs are taxes imposed on goods imported from other countries. While these measures may protect domestic companies, they also increase costs for companies that depend on parts imported from abroad. Companies importing foreign goods pay a tax to the government. Companies may pass on some or all of the tariff costs to their customers.
Last year, the US imported around eight million cars from other countries at a cost of around 240 billion US dollars. This represented about half of all cars sold in the country.
MEXICO IS THE MAIN SUPPLIER OF CARS TO THE US, FOLLOWED BY SOUTH KOREA, JAPAN, CANADA AND GERMANY.
According to estimates by the Anderson Economic Group, tariffs on parts imported from Canada and Mexico alone could increase costs by between 4 000 and 10 000 dollars depending on the vehicle.
German Economy Minister Robert Habeck said that the EU must “react strongly” and “say that we will not give in to the US. We must show strength and self-confidence”.
France supported this common approach and its finance minister said that Europe should retaliate by imposing tariffs on US products.
French President Emmanuel Macron told a press conference on Thursday that this was “not the time” for the US to impose tariffs.
“To impose tariffs is to destroy value chains, it is to create an inflationary effect in the short term and to destroy jobs,” he said in Paris. “All this is rather a waste of time and will cause a lot of worries,” he added, urging Trump to reconsider.
Canadian Prime Minister Mark Carney called the tariffs a “direct attack” on his country and its automotive industry, adding that it “will hurt us” but that trade options are being discussed.
He said that Canada’s old relationship with the US, “based on deep integration of our economies and close security and military cooperation, is over”.
In the UK, the automotive organisation SMMT said that the announcement of tariffs on cars was “not surprising but disappointing”.
JOHN NEILL, FOUNDER OF UNIPARTS, SAID THE TRUMP TARIFFS WERE A “GIFT TO THE CHINESE” AS INTERNATIONAL CONSUMERS WOULD RESPOND TO THE TRADE WAR BY BUYING CHINESE ALTERNATIVES.
Meanwhile, China accused Trump of violating World Trade Organisation rules.
“There are no winners in a trade war or a tariff war. Imposing tariffs does not achieve the development and prosperity of any country,” said a Foreign Ministry spokesperson.
Japan warns that this will have a “significant impact” on its economic relations with the US. A government spokesperson described the measures as “extremely regrettable” and said officials had asked the US to make an exemption for Japan.
A day before the latest levy was imposed in South Korea, Hyundai announced that it would invest 21 billion US dollars in the US and build a new steel plant in Louisiana.
Trump welcomed this investment as “clear evidence that the tariffs are working very well”.
Germany-based Bosch said it was convinced of the “long-term potential” of the North American market and would continue to expand its business there.
The International Monetary Fund said it did not forecast a US recession, but warned that a trade war could have a “significant negative impact” on the economic prospects of Canada and Mexico.