U.S. and European autos stocks fall on Trump's 20% tariff threat

2017 shows U.S. President Donald Trump and Chinese President Xi Jinping attending a welcome ceremony in Beijing. Trump announced tariffs on $60 billion of imports from China

Trump Trade Advisor Says U.S. Turned to Tariffs after Negotiations Made ‘No Progress’ with China Kyodo News via Getty Images 19 Jun 2018Washington DC

Asked last week how she would react if Trump went through with his plan to impose tariffs on European Union auto exports, German Chancellor Angela Merkel said in an interview: "First we are trying to see if we can prevent that from happening - but I can't predict this, so I don't want to raise any false hopes".

"We're going to fix the problem of protectionism around the world, and we're going to fix it by making it more painful for those countries to do bad practices than to do the right thing, which is to lower the trade barriers and lower their tariffs".

The agreed European Union countermeasures will initially target a list of USA goods worth $3.2 billion (€2.8 billion), most of which will be hit with import duties of 25 percent.

'It's extraordinary for the United States to be imposing tariffs on its closest allies, ' says former senior counsel to Canada on CETA, Christophe Bondy, on Power & Politics.

The biggest exporters of cars to the US are Canada and Mexico, followed by Japan and Germany.

The U.S.is also locked in a tariff showdown with China, after President Trump said he would use the import taxes to try to shift the balance of trade between the world's top two economies.

Calling the European Union response proportionate and in line with World Trade Organisation rules, she said that they would be removed if Washington removed its metal tariffs.

The tariffs will hit $3.2 billion in US imports to the European Union.

"The rules of worldwide trade that we have developed over the years with our American partners can not be violated without a reaction from our side", Malmstrom said.

"We've never seen anything like this", said Mary Lovely, a Syracuse University economist who studies worldwide trade - at least not since countries tried to wall themselves off from foreign competition during the Great Depression. Trump is also looking at new tariffs on auto imports, opening a new front in the trade war. The potential trade action would affect more than $200 billion in US imports, PIIE said.

The new duties have been imposed as tensions over trade continued to grow between the USA and China. But if both exports and sales of United States companies inside China are measured, the United States has a surplus of US$20 billion with China, according to Deutsche Bank AG.

Trade representatives from India and the United States are set to meet in New Delhi next week. It expects to employ 2,000 people initially, eventually bringing the workforce up to 4,000, according to its website. Canada's retaliatory measures begin on July 1, and Mexico and other nations have also announced they will respond. Several weeks ago, he ordered Commerce Secretary Wilbur Ross to launch what's known as a "232" investigation.

"Though the immediate effects on United Kingdom retailers might look relatively modest, it is worth paying close attention to this dispute because it's future course is unpredictable, fast moving and could quickly escalate to engulf other, seemingly unrelated areas of trade", he said. "The president has made it very hard for other countries to give him what he wants".

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