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June 22, 2018

Euro, Car Stocks Slide After Trump Threatens 20% Tariffs On All Cars Coming Into US;


Fiat Chrysler, Volkswagen, and BMW shares are sliding following the latest shot across the bow from President Trump in the global trade wars.


This time he took some time off from China and aimed at the European Union, threatening a 20% tariff on all cars coming into the US from Europe...    





Of course, it is just this kind of escalation that most worried Goldman Sachs and as SocGen's Albert Edwards notes below, this was not hard to foresee...
It doesn’t take a genius to see what’s coming down the line after completion of the current US probe into whether vehicle imports have damaged the US auto industry. President Trump has already told French President Macron to expect 25% tariffs on imported autos on the same “national security” grounds used to impose US steel and aluminium duties in March.
Currently, the US charges just 2.5% on car imports. This is lower than the EU’s 10% and China's 25%, although the latter will lower its tariff to 15% from 1 July. And this is the key difference with China (and Japan) in its trade relations with the US. Both these countries will ‘play the game’ and make concessions as well as conciliatory noises. Germany, in my years of observation, will not. It will push back robustly and the legalistic bent of the European Commission will see tit-for-tat tariffs being implemented far faster than anything seen in the current US/China trade spat.
My own observation from a recent two-week trip driving around Lake Tahoe, Yosemite and Sequoia Park is that US automakers appear to have been virtually wiped out in the saloon car market there, and it seems about 80% of saloon cars on the road there are Japanese and South Korean rather than European. But maybe that is just a west coast thing.
The widely divergent 10% vs 2.5% tariff rate on autos between the EU and the US may indeed look like an anomaly in favour of the EU, but it is nothing compared to the 25% protection US light trucks and pick-ups receive (includes two-seat SUVs). No wonder US automakers are clucking all the way to the bank as they dominate this segment of the market.

And it's not just automakers that are suffering, EUR is offered on the back of this...

Courtesy of Tyler Durden, Founder of Zero Hedge  (More by ZH here)    


The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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