Will the EU enter a trade war with the US?

March 21, 2018

EU Consider Sanctions – The European Union is considering moves to slap taxes on a variety of US goods if President Trump goes ahead with proposals to tax European steel and aluminium imports. Shares in the major European car manufacturers have already dropped as a result of threats to add taxes to EU car imports.

What Triggered The Trade War?

In early March, President Trump commented that “trade wars are good” when controversy arose over plans to issue steel tariffs. On Thursday, 1 March he announced steel would be faced with 25% tariffs and aluminium with 10%. This was followed on Saturday, 3 March with the following comment about EU-built cars when he stated that if the EU: “wants to further increase their already massive tariffs and barriers on US companies… we will simply apply a tax on their cars.

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The United States is an important export market for British-built cars with demand rising by 7% through 2017 and exports amounting to around 210,000. In total, the US takes 15.7% of UK car exports. The US already announced tariffs on washing machines and solar panels in January 2018, so this latest move has come as no real surprise.

The EU has drawn up a draft list of potential US goods which could be taxed, these include popular Levi jeans, Harley Davidson motorbikes and bourbon. It’s estimated that the EU could potentially apply a 25% tax on US goods valued around $3.5 billion.

UK Response

UK Prime Minister, Theresa May, telephoned President Trump on Sunday, 4 March to highlight concerns regarding his remarks about imposing tariffs and many countries around the globe are already considering their reactions.

EU Commissioner for Trade, Cecilia Malmstrom, told the BBC that: “We are looking at possibilities to retaliate, meaning we will also put taxes or tariffs on US imports to the European Union.” She added that she would be waiting to review any final US decision but: “we are of course preparing. This has been in the air for some time.” She further commented that if the US did go ahead and levy taxes to European steel the EU would take the matter to the World Trade Organisation for consideration.


BBC Business News