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EU Offer for No Auto Tariffs Is 'Not Good Enough,' Trump Says

Aug. 31, 2018
Rejection comes hours after EU proposes eliminating tariffs.

President Donald Trump rejected a European Union offer to scrap tariffs on cars, likening the bloc’s trade policies to those of China.

“It’s not good enough,” Trump said of the offer from Brussels during an Oval Office interview with Bloomberg News. “Their consumer habits are to buy their cars, not to buy our cars.”

Trump’s comments come just hours after Trade Commissioner Cecilia Malmstrom told European Parliament lawmakers that the EU would be “willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same.” Autos were previously excluded from the discussions that focused on manufactured products bought and sold between the two markets.

Trump compared the EU to China, where the president is engaged in another escalating trade war.

“The European Union is almost as bad as China, just smaller,” Trump said.

Last month, the U.S. and EU agreed not to impose new tariffs on each other after Trump and European Commission President Jean-Claude Juncker met at the White House. The two sides agreed to open discussions about a trade agreement on industrial goods but at U.S. insistence left out cars. Trump has set achieving zero tariffs, zero subsidies and zero non-tariff barriers for industrial goods as part of those talks.

European leaders and the continent’s auto industry have been offering to drop the EU’s 10% tariff on passenger vehicles, a persistent target of Trump’s complaints. He has used the gap between that EU duty and the U.S.’s own 2.5% tariff on passenger cars to justify his plan to impose an import tax of as much as 25% on imported cars and parts.

But that complaint ignores the much higher 25% tariff the U.S. applies on light trucks, the most profitable segment for the U.S. auto industry.

Eliminating tariffs on U.S. auto imports would do little for General Motors Co. and Ford Motor Co., but would lend a major boost to Germany’s BMW AG and Daimler AG. SUVs assembled by the German carmakers in the American South dominate the models exported to Europe from the U.S.

BMW for example is projected to sell nearly 70,000 X3 SUVs in Europe made in its South Carolina factory this year, according to data from LMC Automotive. Compare that to roughly 15,000 units of Tesla Inc.’s Model S sedan, which LMC, an industry data consultancy, projects will be the top-selling model in Europe assembled in the U.S. by an American automaker.

Trump has ordered his Commerce Department to investigate whether car imports imperil national security, under the same provision he invoked to impose global tariffs on steel and aluminum earlier this year.

The findings of the auto study are due by February, though the president could decide to act before then. This week, Trump threatened Canada with auto tariffs if the country failed to join his trade deal with Mexico to replace NAFTA.

By John Micklethwait, Margaret Talev and Jennifer Jacobs

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