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Europe’s Offer To ‘Got To Zero’ On Car Tariffs ‘Not Good Enough’ For Man Who Wants Mercedes Gone From 5th Avenue

"The European Union is almost as bad as China, just smaller."

On Thursday morning, EU trade chief Cecilia Malmström told the European Parliament’s trade committee the following about negotiations aimed at pacifying the Trump administration and avoiding a scenario where the U.S. president slaps tariffs on European autos:

We said that we are ready from the EU side to go to zero tariffs on all industrial goods, of course if the U.S. does the same, so it would be on a reciprocal basis.

We are willing to bring down even our car tariffs down to zero if the U.S. does the same. It would be good for us economically, and for them.

That’s highly amusing, because as noted here when those quotes first crossed the wires, Malmström is effectively calling Trump’s bluff from the G-7 summit in Canada, after which he declared the world should be completely devoid of tariffs and trade barriers.

You can read the full story on that in the linked post, but suffice to say we expressed our doubts about the prospect that Trump would actually agree to the deal which he supposedly wants. To wit, from Thursday morning’s post:

We would note that the E.U.’s proposal here will be a test of whether Trump is actually serious about tearing down trade barriers or whether that’s just a cover for a strategy that involves remaining perpetually at odds with someone, somewhere (and maybe with everyone, everywhere) to ensure there’s always a battle to fight. I talked at length about that possibility over the weekend in “Dream States: Why No Resolution To Current Political Conflicts Is Possible“.

Fast forward a few hours and, as part of a sweeping interview with Bloomberg that touched on a variety of topics, Trump said this about the E.U.’s proposal:

It’s not good enough. Their consumer habits are to buy their cars, not to buy our cars.

Right. Part of that is attributable to the fact that generally speaking, German-made cars are miracles of manufacturing, while cars made in America are legendary for being, well, not so hot, comparatively speaking.

Additionally, it’s not clear what Trump wants. Is he implicitly suggesting that Europe should somehow incentivize consumers to buy U.S. brands over German models?

As noted earlier, Trump’s criticism of E.U. auto tariffs conveniently leaves out the “Chicken Tax” issue.

“The widely divergent 10% vs 2.5% tariff rate on autos between the EU and the US may indeed look like an anomaly in favor of the EU, but it is nothing compared to the 25% protection US light trucks and pick-ups receive (includes two-seat SUVs)”, SocGen’s Albert Edwards wrote in a note from June. “No wonder US automakers are clucking all the way to the bank as they dominate this segment of the market”, he added.

Trump’s comments to Bloomberg come a month after he and Jean-Claude Juncker  celebrated what was variously billed as a “breakthrough” on trade with a hastily-convened press conference at the Rose Garden that was long on rhetoric and short on specifics.

Three months back, WirtschaftsWoche detailed what they said was a conversation the U.S. President had with Emmanuel Macron, who was informed that Trump intends to rid Fifth Avenue of Mercedes.

US President Donald Trump has announced to French President Emmanuel Macron to exclude German premium car makers from the US market. On Macron’s visit to Washington in April, Trump said he would maintain his trade policy until no Mercedes models rolled on Fifth Avenue in New York. This reports the WirtschaftsWoche, citing several diplomats from Europe and the United States .

Analysts generally assign a low probability to Trump moving ahead with auto tariffs on national security grounds, but earlier this month, Credit Suisse suggested that the real tail risk may in fact be the car duties, not further escalations in the 301 investigation with China.

“If auto tariffs became widely expected in the short term that would be a negative shock to developed market IP growth expectations, but we do not think that the US administration would risk the shock to developed market equities and investment spending that auto tariffs could present – at least before the November elections, that is”, the bank wrote, in a client note.

Wishful thinking, perhaps.

In July, Trump described the E.U. as a “foe” on trade. In the Bloomberg interview on Thursday, Trump said “the European Union is almost as bad as China, just smaller.”

As usual, it’s difficult to wrap one’s head around the sheer blatant absurdity.

Read more on Trump’s auto tariff plan:

‘Trust Me’: As Executives, Republicans Warn Of $200 Billion Mistake, Trump Forges Ahead With Auto Tariffs

‘No One Asked For This’: Global Automakers Crushed As Trump Decides Cars Are A Threat To National Security

 

 

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2 comments on “Europe’s Offer To ‘Got To Zero’ On Car Tariffs ‘Not Good Enough’ For Man Who Wants Mercedes Gone From 5th Avenue

  1. Anonymous

    There’s only 2 US cars in the 10 best selling cars in the USA list.

  2. djt must have forgotten about the 25% truck tariff the US charges. US auto makers cant seem to make a profit on a regualr sedan, but can make a ton on trucks…esp with no foreign competition. i wonder how euro trucks would fare here given a 25% reduction in price. but its no mystery what would happen to ford gm and chrysler if they had to lower truck prices 15% and all the incentives currently pushed.

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