EU warns Trump: auto tariffs could lead to $300B retaliation

Volkswagen export cars are seen in the port of Emden, beside the VW plant, Germany, March 9, 2018. (Reuters)
Updated 02 July 2018

EU warns Trump: auto tariffs could lead to $300B retaliation

  • The EU tells the US tariffs on cars and car parts were unjustifiable and did not make economic sense
  • The EU has a 10 percent levy, compared with 2.5 percent for cars entering the United States

BRUSSELS: The European Union has warned the United States that imposing import tariffs on cars and car parts would harm its own automotive industry and likely lead to counter-measures by its trading partners on $294 billion of US exports.
In a 10-page submission to the United States Commerce Department sent last Friday, the European Union said tariffs on cars and car parts were unjustifiable and did not make economic sense.
The Commerce Department launched its investigation, on grounds of national security, on May 23 under instruction from President Donald Trump, who has repeatedly criticized the EU over its trade surplus with the United States and for having higher import duties on cars. The EU has a 10 percent levy, compared with 2.5 percent for cars entering the United States.
Trump said last week that the government was completing its study and suggested the United States would take action soon, having earlier threatened to impose a 20 percent tariff on all EU-assembled cars.
The European Commission, the EU executive that handles trade for the bloc, said on Monday it was trying to convince its US counterparts that imposing such tariffs would be a mistake.
“We’ll spare no effort, be it at the technical or political level, to prevent this from happening,” a spokesman for the Commission told reporters, adding that Commission President Jean-Claude Juncker’s trip to Washington later this month would seek to stop any new US tariffs.
The bloc exported 37.4 billion euros ($43.6 billion) of cars to the United States in 2017, while 6.2 billion euros worth of cars went the other way.
The European Union says that for some goods, such as trucks, US import duties are higher.
In its submission, the EU said EU companies make close to 2.9 million cars in the United States, supporting 120,000 jobs — or 420,000 if cars dealerships and car parts retailers are included.
Imports had, it said, not shown a dramatic increase in recent years and largely grown alongside overall expansion of the US car market, with increased demand that could not be met by domestic production.
The submission said that tariffs on cars and car parts could undermine US auto production by imposing higher costs on US manufacturers. The EU had calculated that a 25 percent tariff would have a initial $13-14 billion negative impact on US gross domestic product with no improvement to its current account balance.
Assuming counter-measures along the lines of those taken in response to existing US import tariffs on steel and aluminum, up to $294 billion of US exports — 19 percent of overall US exports — could be affected, the submission said.
The submission also said that the link between the automotive industry and national security was “weak.” Military vehicles, such as the Humvee, were made by different, more niche producers. ($1 = 0.8582 euros)


Diplomats in Paris discuss aid for battered Lebanese economy

Updated 13 min 26 sec ago

Diplomats in Paris discuss aid for battered Lebanese economy

  • Bteish said the situation is "worsening" and requires a quick solution
  • Lebanon has been swept by protests since Oct. 17

PARIS: Diplomats were meeting behind closed doors in Paris on Wednesday to consider measures to help Lebanon as it grapples with ongoing political turmoil and its worst economic crisis in decades.
The international group, co-chaired by France and the United Nations, is weighing conditions for providing financial aid to Lebanon. Lebanese businesses and households are growing increasingly desperate as cash supplies there have dwindled.
For two months, protests have decried government mismanagement and the current political system. But even as the financial crisis deepens, protesters have denounced the Paris meeting and promised to condemn any international financial assistance to a government they see as corrupt and illegitimate.

Lebanon's caretaker economy minister Mansour Bteish said the country's economy is losing at least $70 million-$80 million a day - about half its usual income - due to the crisis that has paralysed the country, he told broadcaster MTV on Wednesday.
Bteish said the situation is "worsening" and requires a quick solution. 
Prime Minister Saad Hariri resigned Oct. 29, but he has stayed on as caretaker prime minister since politicians have been unable to form a new government. Protesters want to see a non-sectarian, technocratic government — and they want all traces of the old regime, including Hariri, out of office.
France and the US have made clear they support a new government in Lebanon.
Speaking in Washington on Wednesday, US Secretary of State Mike Pompeo told reporters that “the responsibility lies with the Lebanese people” to push for a new political order. He said the US is ready to “do the things that the world can do to assist the Lebanese people getting their economy right and getting their government right.”
The US has escalated its sanctions on the Iran-backed Lebanese Hezbollah group, which dominates the national unity government that Hariri headed.
French Foreign Minister Jean-Yves Le Drian said at a press conference ahead of the Paris meeting that Lebanese authorities must “take into account the call of the street.” He urged Lebanese authorities to “form a government rapidly because any delay will aggravate the situation.”
Meanwhile, dozens of protesters in Beirut and Paris rallied Wednesday to call on the leaders meeting in France not to give financial assistance until a new government comes together.
“This authority ... no longer represents the Lebanese,” said a protester in Beirut reading a letter to be delivered to the French ambassador. Calling the current government corrupt, the protester said: “We don’t want (that aid) to go to waste.”
Hariri has called on Saudi Arabia, France, Turkey, the United States, China, and Egypt to send funds to help Lebanon finance imports.
But international donors are unlikely to write a check without substantial commitments to reform. More than 50 countries pledged last year to give Lebanon $11 million in aid, conditioned on Hariri implementing long-stalled reforms. Promised reforms never materialized.