The following article was written by Ramy Abouzaid, Head of Research at ATFX, UAE.
- US-EU Auto Tariffs: A Closer Look
- Global Economic Indicators
- This Week’s Economic Calendar
Under the radar: Trump directs his weapon towards European auto makers
Ramy Abouzaid, ATFX
US President Donald Trump told reporters on an Air Force plane on Friday that his government’s investigation into tariff increases for cars from the European Union and other trading partners would be completed within three to four weeks, according to Reuters.
Strangely, in recent US administration decisions on protectionist measures that could trigger a real trade war, these measures come at a rapid pace and on more than one front. According to Reuters reporter Jeff Mason, US President Donald Trump Speaking to reporters aboard Air Force One as he traveled from Washington to New Jersey said on Friday his administration’s investigation into whether to increase tariffs on cars from the European Union and other trading partners would be completed in three to four weeks. Trump also said the United States has been treated very badly by the World Trade Organization, but he is not considering withdrawing from it at this point. Asked when the probe would be concluded, he said: “Very soon. It’ll be done in three, four weeks.”
Trump ordered the “Section 232” national security probe into autos on May 23, and his unusually fast timeline calls for it to be possibly completed in just over two months. Similar national security probes ordered last year that led to import tariffs of 25 percent steel and 10 percent on aluminum, took about 10 months to complete. By law, the Commerce Department has 270 days to offer recommendations to the president after a Section 232 probe starts. The president then has 90 days to act upon those recommendations. Written comments from interested parties in the autos probe were due on Friday, and the administration has scheduled a public hearing for July 19-20.
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 U.S. exports.
In a 10-page letter sent by the European Commission to the US Department of Commerce last Friday, The European Commission tried to clarify the following key massages:
- EU car makers made approx. 2.9 million cars in the United States, which is supporting 120,000 jobs – or 420,000 if auto dealers and parts dealers were included.
- The bloc exported 37.4 billion euros ($43.6 billion) of cars to the United States in 2017.
- 6.2 billion euros was imported to EU countries from USA.
- In some goods, such as trucks, US import duties are higher.
- The report said tariffs on cars and auto parts could undermine US car production by imposing higher costs on American manufacturers.
- The EU has calculated that the 25 per cent tariff would have an initial impact of $ 13-14 billion on US GDP without any improvement in the current account balance.
- Assuming countermeasures such as those taken in response to current US steel and aluminum import tariffs, up to $294 billion of US exports – 19 percent of total US exports – could be affected.
USA / Euro Area / United Kingdom / Japan
Economic Calendar:
(1) Data sources & references:
• Thomson Reuters Eikon.
• Investing.com
• TradingEconomics.com
• forexfactory.com
Disclaimer – This document is for information and illustrative purposes only and are not indicative of future results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only and are subject to change without notice. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not prove to be true, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those discussed, if any. No part of this document may be reproduced in any manner, in whole or in part, without prior written permission.
This information is provided with the understanding that with respect to the material provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. Owing to the long term and high-risk nature of the investments, the strategy may not be suitable for all investors. By accepting this material, you acknowledge, understand and accept the foregoing. High Risk Investment Warning: Contracts for Difference (CFDs) are complex financial products that are trading on margin. Trading Foreign Exchange (Forex) and CFDs is highly speculative, and carries a high level of risk, and may not be suitable for all investors, and therefore you should be aware of all the risks associated with trading these products and trading on margin. You may sustain a loss on some or all your invested capital, and therefore shouldn’t speculative with capital that you cannot afford to lose.
Past performance is not a reliable indicator of future results. AT Financial Market Ltd (ADGM) is regulated by the Financial Services Regulatory Authority, FSRA Permission Number 170006. Registered Office: 8th Floor, Al Maqam Tower, ADGM Square, Al Maryah Island, Abu Dhabi, UAE, and only communicates this information for Professional Clients only, with no other persons acting upon it.