A 25% tax on European Union auto imports is one of President Donald Trump’s proposed tariffs. He insisted on Wednesday that the trade bloc had “taken advantage” of the United States and that its member states “don’t accept our cars.”
Even while the major automakers in the European Union are changing their positions in reaction to Trump 2.0’s policies, some trade experts have not been convinced by his promises.
“I do think the president is really cherry-picking,” said Jennifer A. Hillman, a trade expert and Georgetown University professor who oversaw the U.S. Trade Representative’s general counsel during the Clinton administration.
Hillman continued, “He focuses, for example, a lot on the tariff on cars – that the European Union has a tariff of 10% and we have a tariff of 2.5% and that’s his big example of how outrageous this is, and yet he doesn’t remind everybody that we have a tariff of 25% on trucks,” during a webinar hosted by the Washington International Trade Association on Thursday. “Everything is so unfair to the United States that we need to do this major rebalancing because, if you look at the entire… vehicle sector, our tariff is higher than Europe’s. Therefore, I think we need to be very careful about accepting this myth that everyone else has really high tariffs and we don’t. That isn’t accurate, in my opinion.
It’s not realistic to claim there’s a “big gulf” between the U.S. and its trading partners, she said, adding that the U.S. has a trade-weighted average tariff of 2.2%, the EU has 2.7%, and China has 3%.
The EU levies a 10% tax on light vehicles, whereas the U.S. only levies a 2.5% tariff, as the Trump White House has pointed out in its statement supporting a “fair and reciprocal plan” on trade. Two weeks ago, the declaration was made public, denouncing a number of “unfair trade practices” by the United States’ trading partners. In addition to potentially imposing fresh tariffs on April 2, the Trump administration has committed to releasing a report on trade policies by April 1.
Trump did speak favorably of the chicken tax during his first term, even if he does not seem to have lately noted America’s 25% tariff on imported trucks, which has been in effect for 60 years and applies to the majority of sport-utility vehicles.
It makes sense for German automakers to have facilities in the United States to produce their SUVs given the current tariff. According to a Wall Street Journal report last week, the corporations then export those SUVs from the U.S. to Europe while shipping sedans from Europe to the U.S. In October, Trump made reference to German automakers’ U.S. operations, but not in a good way, claiming that they were only putting together parts from a box that a kid could accomplish instead of creating cars.
German automakers have signaled this month that they are responding to Trump’s positions with some fresh changes. According to a Reuters report last week, Mercedes-Benz (XE:MBG) intends to localize more manufacturing at its Alabama facility, while Volkswagen’s (XE:VOW3) Audi unit, which does not currently have a U.S. production base, intends to declare one this year. Because it exports automobiles to Europe from an American plant, the newspaper also mentioned that BMW (XE:BMW) has urged for the EU to lower its duty on U.S. auto imports from 10% to 2.5%.
Trump had already warned on February 18 to slap duties on foreign-made cars “in the neighborhood of 25%” prior to his remarks on Wednesday regarding tariffs aimed at the EU, in which he stated that “it’ll be 25% generally speaking, and that’ll be on cars and all the things.”
On Thursday, a representative for the European Automobile Manufacturers Association told MarketWatch that Trump’s tariff proposals are “currently entirely hypothetical” and that there is “no concrete information to discuss.”
After selling off its Opel and Vauxhall brands in 2017, General Motors (GM) has pulled back in Europe, and two years ago, Ford’s (F) Europe division stated that 3,800 positions will be eliminated in an attempt to run a leaner, more competitive company.
