Trump trade war: European car shares hit

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Media captionTrump on new tariffs: ‘We haven’t been treated fairly’

Shares in major European car makers fell on Monday following a threat by US President Trump to tax their vehicles.

He said he would act if the European Union retaliated to his plan to put tariffs on aluminium and steel imports.

He said 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.”

BMW shares fell 3%, Volkswagen and Daimler 2.5%, while Italy’s Fiat Chrysler also fell.

The US is an important market for cars built in the country. US demand for British-built cars rose by 7% in 2017, with exports reaching almost 210,000, and the US is now the UK’s second-largest trading partner after the EU, taking 15.7% of car exports.

Last week, President Trump said that “trade wars are good” amid controversy over his decision to impose tariffs on steel and aluminium imports.

His comments have prompted reaction around the world, and Prime Minister Theresa May expressed her concern in a telephone call to Mr Trump on Sunday.

Jason Furman, former chairman of the Council of Economic Advisers under President Obama, and now an economics professor at Harvard, told the BBC the proposed tariffs were” a very costly and inefficient way to help a small number of people”.

He says the tariffs will hurt workers and consumers, who are likely to face higher prices. “This could be bad or awful, there’s no scenario under which it’s good.”

What does Trump want to do and why?

Mr Trump has decried the “$800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies”, and vowed to end it.

On Thursday, he said steel imports would face a 25% tariff and aluminium 10%.

Then came Saturday’s threat on EU-made cars.

In January, he had already announced tariffs on solar panels and washing machines.

What are US’s trading partners making of this?

Downing Street said that during Mrs May’s call to President Trump on Sunday she raised “our deep concern at the President’s forthcoming announcement on steel and aluminium tariffs, noting that multilateral action was the only way to resolve the problem of global overcapacity in all parties’ interests.”

Zhang Yesui, spokesperson for China’s National People’s Congress, said it was natural that “some friction will exist” between the US and China, given the volume of trade between them surpassed $580bn (£420bn) last year.

But he said China would take “necessary measures” if its interests were hurt.

Canada said tariffs would cause disruption on both sides of the border. Prime Minister Justin Trudeau said he was “confident we’re going to continue to be able to defend Canadian industry”.

EU trade chiefs have reportedly been considering slapping 25% tariffs on around $3.5bn of imports from the US – targeting iconic US exports including Levi’s jeans, Harley-Davidson motorbikes and Bourbon whisky.

Brazil, Mexico and Japan, that have said they will consider retaliatory steps if the president presses ahead with his plan next week.

The move has also been strongly criticised by the International Monetary Fund and the World Trade Organization.

Has Trump got political support at home for a trade war?

A number of Republicans have questioned the wisdom of the tariff proposal and have been urging the president to reconsider.

Senator Orrin Hatch said American citizens would be made to pay.

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Critics say the plan could put US jobs at risk

Senator Ben Sasse agreed that “kooky 18th Century protectionism will jack up prices on American families”.

Industry bodies like the US Motor and Equipment Manufacturers Association have expressed deep concern.

But steelworkers in Pennsylvania and Indiana will welcome Mr Trump’s comments.

Is Trump right about the trade imbalance?

The US imports steel from more than 100 nations and brings in four times more steel from abroad than it exports.

Since 2000, the US steel industry has suffered, with production dropping and the number of employees in steel work falling.

The US is the largest export market for EU cars – making up 25% of the €192bn (£171bn; $237bn) worth of motor vehicles the bloc exported in 2016 (China was second with 16%).

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