Donald Trump tweeted Friday that car imports from EU will face a 20% tariff unless the EU lifts tariffs on US cars. He had previously threatened 25%. This is yet another example of the trade war Trump seems hell bent on starting between the US and its trading partners.
Car Imports from EU Just the Beginning of a Trade War
Already the EU has responded to the US steel and aluminum tariffs with tariffs of its own on US products. The major issue here appears to be that any tariffs applied by the US on foreign imports will be responded to in kind. US Bourbon, orange juice, and other products are facing similarly high tariffs after the recent EU response. China is also responding in kind, leading to a trade war that will be good for nobody and the US in particular. Auto shares on both sides of the Atlantic fell after the latest news.
A 25% tariff on Chinese goods is due to be enacted on July 6 and China has responded in kind, with a similar tariff on US goods. It now transpires that Trump has instructed the US trade representative to come up with another $200 billion of Chinese imports for a 10% tariff.
A Trade War Nobody Can Win
This can have only one result: a tit-for-tat trade war between the US and the largest customers for its goods. It’s a trade war that no side can possibly win. It will lead either to severe shortages in the shops and markets for certain goods, or they would be available only at inflated prices. Additionally, US exporters will find it increasingly more difficult to sell their products in the Asian and EU markets with potential harm to the USD jobs market.
Any goods that cannot be provided to the American consumer by US companies will be available at largely inflated prices or not available at all. US manufacturers will not be able to make up for the imports lost to the US through this policy. This will likely lead to empty shelves and the unavailability of certain goods at affordable prices.
Effects of Car Import Duty Will be Felt by All
For now, it has largely been all talk, although the time is coming when it becomes more than that and the effects are felt throughout the US, Europe, and China. Collateral damage may be felt worldwide, although for now there have been few effects felt by the average consumer.
Nevertheless, it will come and the effects may be hard to bear for many. Not only the effects of a car import duty, but a general trade war with the US on one side, and the EU and China on the other. Car imports from EU are just one aspect of this sorry affair which is believed by most to have been needless and protectionist. The import-export market is a global one and it has suddenly been disrupted for what reason?