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Trump threatens Europe with 20 percent tariffs on auto imports, escalating trade showdown with U.S. allies

European Union trade commissioner Cecilia Malmstrom adresses a news conference on the U.S. tariffs on steel and aluminium in Brussels on June 1. (Photo by Emmanuel Dunand/AFP/Getty Images)

President Trump on Friday threatened in a tweet to unilaterally impose a 20 percent tariff on all automobile imports from Europe, further breaking from Republicans in Congress and front-running an investigation he had ordered from the Commerce Department into whether these imports harm the U.S.'s national security.

It was the first time he had threatened to impose a specific level of tariffs on automobiles from Europe.

The tweet came as Europe imposed tariffs on goods worth 2.8 billion euros ($3.2 billion) -- including Harley Davidson motorcycles and Levi's jeans — which are themselves a targeted response to Trump’s earlier decision to impose steel and aluminum tariffs on European exports to the United States.

Trump and Peter Navarro, one of his top trade advisers, have long believed that the European Union has an unfair tariff on U.S. exports while the U.S. government makes it relatively easy for other countries to send their cars here.

The E.U. charges a 10 percent tariff on auto imports from the United States. Trump is threatening to impose a tariff double that size if the E.U. doesn't remove its barriers.

[India imposes retaliatory tariffs on U.S., widening global trade war]

Last month, Senate Foreign Relations Committee Chairman Bob Corker (R-Tenn.) called Trump's idea of imposing tariffs on auto imports "dangerous" and led an effort on Capitol Hill to strip away some of the White House's authority.

So far Congress has does done little to check Trump's authority in this area but members in constituencies which are most vulnerable to rising tariffs expressed their concerns. Rep. Bradley Byrne (R-Ala). represents the port of Mobile and his state is home to many foreign auto plants. “So it’s a big deal for my state, it’s a very big deal," he said. "So I’m worried about these tariffs.”

“These are a lot of jobs and I’ll tell you I know a lot of those people in those plants, they all voted for Donald Trump. These are Trump voters. .. He would not be acting in their best interests."

Nonetheless Byrne said persuasion is better with the White House than legislation, which he called “a pretty blunt tool in trade to use legislation.”

The U.S. imposes a 2.5 percent tariff on auto imports from Europe, and a 25 percent tariff on light-truck and van imports.

The U.S. imported $62.5 billion in autos and auto parts from the European Union in 2017, according to U.S. Census data, and a 20 percent tariff on these goods could drive up their costs for consumers.

Trump has long believed that U.S. workers and companies are ripped off by other nations, which flood the U.S. market with cheap goods while imposing large barriers to make it hard for U.S. companies to compete overseas. He has demanded reciprocity. A number of countries, including several in Europe, have shown a willingness to negotiate, but many have so far rebuffed Trump's take-it-or-leave-it demands.

Meanwhile, Trump's economic team is stretched thin, working on trade-related actions or discussions in multiple countries around the world simultaneously.

Trump had a messy showdown with leaders from Europe and Canada at a recent Group of Seven meeting. French leader Emmanuel Macron has accused Trump of being protectionist and isolationist, and Trump has had a chilly relationship with German Chancellor Angela Merkel. Germany is the largest European manufacturer of automobiles, though Germany companies have a huge presence in the United States, with large factories in South Carolina and Tennessee.

It is difficult for the White House to unilaterally impose tariffs without input from Congress, but Trump has found several ways to do it this year. Several weeks ago, he ordered Commerce Secretary Wilbur Ross to launch what's known as a "232" investigation. If this investigation finds that the “national security” of the United States is compromised by a reliance on imports, than tariffs can be imposed.

Trump used a similar tactic to unilaterally impose tariffs on aluminum and steel imports from a number of countries, enraging a number of U.S. lawmakers but also his foreign counterparts in Europe, Canada, Mexico, Japan, and a number of other countries.

“By linking the threatened imposition of U.S. tariffs to E.U. tariffs imposed on U.S. autos, the President has both short-circuited the 232 process and conclusively undercut the stated national security rationale of that investigation," said Daniel Price, a former senior economic adviser to President George W. Bush.

The new E.U. tariffs are intended to retaliate for Trump's steel and aluminum tariffs, which E.U. leaders have declared illegal on numerous occasions and are contesting before the World Trade Organization.

In a speech Thursday in Dublin, Jean-Claude Juncker, president of the European Commission, decried once again what he suggested was unnecessary aggression from the White House. Trump’s tariffs, he said, contradict “all logic and history.”

“We did not want to be in this position,” Cecilia Malmström, the E.U.’s trade chief, said in a statement Wednesday. She had earlier sought to dispel anxieties that the situation would become a trade war. “However, the unilateral and unjustified decision of the U.S. to impose steel and aluminum tariffs on the E.U. means that we are left with no other choice,” she said.

The new tariffs target a wide range of American products, but the E.U.’s list includes a number of products chosen specifically to exact a political price from Trump and his supporters.

“If we chose products like Harley Davidson, peanut butter and bourbon, it’s because there are alternatives on the market,” said Jyrki Katainen, the European Commission's vice president for growth, jobs and investment, in a statement. “We don’t want to do anything that would harm consumers. What’s more, these products will have a strong symbolic impact.”

One of the most frequently discussed items on the E.U.’s list is bourbon, a specialty from the home state of Senate Majority Leader Mitch McConnell (R-Ky.). Also on the list are cranberries, which often come from the home state of House Speaker Paul D. Ryan (R-Wis.), and orange juice, produced in the key swing state of Florida.

The E.U.’s tariffs are not the first retaliation in the escalating global trade war started by the Trump administration: Mexico and China have already launched retaliatory tariffs of their own, while Canada and Japan are soon likely to follow suit.

But the E.U. tariffs also come in addition to a historic decline in transatlantic relations, especially in the aftermath of the Group of Seven summit in Quebec earlier this month, when Trump withdrew the United States from a multilateral communiqué at the last minute.

As he sought to reach a denuclearization agreement with North Korea’s Kim Jong-Un, Trump has likewise minced no words in chastising his European counterparts. This has especially been the case with regard to German Chancellor Angela Merkel, the leader of Europe’s largest economy and most populous nation.

‘The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition,” Trump tweeted earlier this week.

“Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture!” (In fact, according to the German government, crime dropped to a 25-year low last year.)

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