Trump trade war: European car shares hit

Trump trade war: European car shares hit
From BBC - March 5, 2018

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 havery 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."

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

Is Trump right about the trade imbalance?


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