Tit-for-tat row sees Trump threaten increased taxes on European cars

The EU may increase taxes on US goods in response to Trump's Friday announcement

Tit-for-tat row sees Trump threaten increased taxes on European cars

US President Donald Trump and first lady Melania Trump arrive at Andrews Air Force Base, Maryland, 03-03-2018. Image: Andrew Harnik/AP/Press Association Images

Us President Donald Trump has threatened to increase taxes on European cars if the EU retaliates against tariffs on steel and aluminium.

President Trump said he would slap a tax on cars from the continent after the European Commission's president said on Friday the bloc would tax American goods, mainly from strong Republican states.

Jean-Claude Juncker said plans to put tariffs on products such as Kentucky bourbon, Levi's jeans and Harley-Davidsons had not been finalised.

He said they would treat the products "the same way" the US wants to handle tariffs on European metals.

In retaliation, Mr Trump tweeted on Saturday night: "If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there.

"Big trade imbalance!"

He also hit out at "very stupid" trade deals by earlier administrations and said other countries "laugh at what fools our leaders have been. No more!"

The tit-for-tat row started when Mr Trump announced on Thursday that he would impose stiff tariffs of 25% on steel and 10% on aluminium imports from anywhere in the world.

His announcement shocked many industry executives but meant he was following up on a key campaign promise of "America first."

Shortly after the statement, Mr Juncker told German media: "None of this is reasonable, but reason is sentiment that is very unevenly distributed in this world."

Richard Warren, head of policy at UK Steel, said he hoped the metal tariffs did not apply to the UK and accused Mr Trump of "short-termism" and protectionism, adding there would be unintended consequences for global trade and steel users in the US.

Almost 15% of the UK's high-value steel products - about £360m - are exported to the US annually, he added.

German Chancellor Angela Merkel's spokesman warned the tariffs could lead to a global trade war which "can't be in anyone's interest."

Australian, Canadian and other American trade partners also launched retaliatory threats.

The US already has a 2.5% duty tax on European cars against the 10% tax which the EU levies on American-made cars.

Despite Mr Trump's bravado, his threat to further tax cars and metals may be difficult to pull off.

The current tax on European cars was decided through complicated international negotiations so to increase it the President may have to pull the US out of the World Trade Organisation.