EU Warns It Will Retaliate If US Imposes Auto Tariffs

European Union To React If US Impose

The European Union is preparing a list of counter-measures to potential US tariffs on European cars, European Trade Commissioner Cecilia Malmstrom said on Thursday, adding she hoped an EU visit to Washington could help ease tensions.

The trade deal signed by the EU eliminates some $1.17 billion in tariffs for European companies that export to Japan.

"Frankly, the notion that imports of autos and auto parts from your closest allies could threaten US national security is, bluntly speaking, absurd", O'Sullivan told the hearing as he signaled there would be countermeasures against Washington's possible restrictive trade measures.

That follows an earlier move by Washington to impose 25 percent tariffs on $34 billion of Chinese goods.

Referring to Ottawa's counter-tariffs in retaliation for the USA imposition of stiff global duties on steel and aluminum imports, Kirsten Hillman, Canada's deputy ambassador to the United States, warned that if auto tariffs were levied, "Canada will once again be forced to respond in a proportional manner".

Aikawa argued the growth of the US automotive manufacturing base owes much to the globalization of the industry and its value chain. According to the submission, some 120,000 jobs were created on U.S. soil by the European companies which make nearly 2.9 million cars.

"If the USA would impose these vehicle tariffs that would be very unfortunate, but we are preparing together with our member states a list of rebalancing measures as well", she said.

At the 25 EU-Japan Summit, which took place in Tokyo 0n 17 July, two landmark agreements - the Strategic Partnership Agreement and the Economic Partnership Agreement - have been signed, significantly boosting bilateral relations.

European Union To React If US Impose
Forcing China on trade with illegal action will not work - EU's Malmstrom

Exports are likely to continue to grow because global demand remains firm, but Japan's trade surplus with the United States makes it a potential target for Trump's protectionist policies. The surplus with the US was 3.15 trillion yen ($27 billion).

Most of Japan's top exports to the United States fared poorly in June. It will remove the vast majority of the €1 billion of duties paid annually by European Union companies exporting to Japan, and has led to the removal of a number of long-standing regulatory barriers, for example on cars. This show of solidarity comes at a time of heightened economic and geopolitical tensions based on Trump and his America First policy.

The issue of automotive industry tariffs came to the surface after US President Donald Trump had ordered the Commerce Department in May to conduct an investigation into the bloc's trade surplus with the US and higher import tariffs on cars.

Japan's exports to the United States fell 0.9 percent year-on-year in June, versus a 5.8 percent year-on-year rise in May, due to a decline in shipments of cars and semiconductor manufacturing equipment.

In a study out Thursday, the Center for Automotive Research found that a 25 percent tariff on autos and parts would cut USA auto sales by 2 million and wipe out 714,700 jobs.

The American Automotive Policy Council, which represents GM, Ford Motor Co. and Fiat Chrysler Automobiles, said there is "no evidence" that automobile imports pose a threat to US national security.

Matt Blunt, president of the council, warned that the envisaged levy would diminish the contributions to the US economy made by the three automakers with their iconic brands and deep American roots.

The deal eliminates about 99% of the tariffs on Japanese goods to the EU, but remaining at around 94% for European imports into Japan for now and rising to 99% over the years.

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