Trump threatens Europe with 'tremendous retribution' as the possibility of massive auto tariffs loom

Carlos Barria/Reuters

U.S. President Donald Trump reacts as he sits on a truck while he welcomes truckers and CEOs to attend a meeting regarding healthcare at the White House in Washington, U.S., March 23, 2017.

• President Donald Trump threatened "tremendous retribution" against the European Union, including tariffs on cars, unless European Commission President Jean Claude Juncker offers major trade concessions next week.
• The threat comes as the auto industry ramped up its campaign to try and dissuade Trump from imposing auto tariffs.
• Republican lawmakers are also attempting to avert any auto tariffs.

President Donald Trump on Wednesday threatened to ramp up the trade conflict with the European Union unless the group's leaders agree to significant concessions.

During a Cabinet meeting, Trump insisted that European Commission President Jean Claude Juncker needs to make a major trade offer to lower barriers on automobiles during his trip to the US. Otherwise, Trump said, the US will be forced to hit the EU with trade restrictions.

"We said if we don't negotiate something fair, we have tremendous retribution which we don't want to use but we have tremendous powers," Trump said. "Including cars, cars is the big one, and you know what we're talking about with respect to cars and tariffs on cars."

The US Commerce Department is in the midst of an investigation into auto imports, and Trump has previously threatened large tariffs on imported cars. Such a move would represent a massive escalation of Trump's tariffs on the EU and likely push the two sides into a full-on trade war.

Tariff deadline approaching

While Trump has been critical of auto imports throughout his presidency, the president announced in May that the US would launch an investigation under Section 232 of the Trade Expansion Act. That end result could be more tariffs - and likely economic turmoil.

Trump has directly threatened to impose a tariff of 20% on auto imports from the EU to the US.

"Based on the Tariffs and Trade Barriers long placed on the US and its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the US," Trump tweeted. "Build them here!"

Many European automakers, including brands like BMW and Mercedes, already produce cars at plants in the US.

Any tariffs on vehicles would be a massive escalation in the trade fight between the EU and US. In 2017, the US imported just over $43 billion worth of vehicles just for people transportation. Any measures on automobiles would dwarf those on steel and aluminum, which hit a little over $7 billion worth of EU exports to the US.

A hearing on the possibility of auto tariffs is scheduled for Thursday, with dozens of speakers from across the industry set to weigh in. Following the hearing, the Commerce Department could release a recommendation on the tariffs within weeks.

'A massive tax on consumers'

While Trump appears ready for a high-stakes show down, automakers from around the world begged the president to deescalate the conflict in a letter released Wednesday.

Seven auto industry trade groups that represent large automakers like Ford, GM, and Toyota, as well as dealers and parts manufacturers, said tariffs on imports auto goods would be damaging to the US economy and American consumers.

Bill Pugliano / Stringer / Getty Images

"Raising tariffs on autos and auto parts would be a massive tax on consumers who buy or service their vehicles - whether imported or domestically produced," the letter said. "These higher costs will inevitably lead to declining sales and the loss of American jobs, as well as increasing vehicle service and repair costs that may result in consumers delaying critical vehicle maintenance."

Almost every major auto manufacturer, from foreign companies BMW and Hyundai to American brands like GM and Ford, submitted comments to the Commerce Department warning about the possible impact of tariffs on US auto workers and consumers.

Lawmakers push back

Members of Congress have also pushed back on the president's plans.

Sens. Doug Jones, a Democrat from Alabama, and Lamar Alexander, a Republican from Tennessee, said Wednesday that they were working on a bill that would at least delay auto tariffs for some time. Both senators represent states with large auto manufacturing bases.

According to Politico, the bill would pause the Commerce Department's investigation on autos until after the International Trade Commission conducts its own study. The senators say the measure would give Trump time to change his mind.

"I realize that folks affected by these proposed tariffs are looking for a silver bullet to stop them dead in their tracks," Jones told Politico. "Right now, the only silver bullet in this case is for the president to change his mind."

The bill also comes as more Republican lawmakers threaten to wrest control of trade policy back from the president. GOP Sens. Bob Corker and Pat Toomey developed a bill that would give Congress approval on all national security tariffs.

Republican Senate Finance Committe Chair Orrin Hatch also warned Trump in a speech Tuesday that legislation may be necessary unless the president reverses course.

"If the administration continues forward with its misguided and reckless reliance on tariffs, I will work to advance trade legislation to curtail presidential trade authority," Hatch said.

In the House of Representatives, meanwhile, a group of 149 bipartisan lawmakers sent a letter to Commerce Secretary Wilbur Ross urging against the tariffs.