Trump’s car tariffs for Europe could cost 100,000 US jobs

06 July 2018 3 min. read
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According to a report from economic analysis and research consultancy Oxford Economics, President Trump’s threatened 20% tariff on imported EU cars could cost 100,000 US jobs. The firm also projects that it would knock 0.1% off of the US GDP in 2019.

President Donald Trump’s campaign of protectionism ramped up in velocity when the US president threatened to place a 20% tariff on European automobiles last month. The threat of tariffs on EU car imports, which would mostly affect Germany, arrives after Trump imposed steel and aluminum tariffs earlier in the year. The EU responded in kind by putting tariffs on $3.25 billion worth of US-made products like jeans and bourbon. The latest escalation in Trump’s protectionist policy threatens to unleash another round of retaliatory action from the EU, likely leaving both regions in worse economic shape. The EU has promised to hit up to $300 billion in US goods with countermeasures if Trump goes through with the auto tariffs.

The negative economic effects of the car tariffs would be felt in the US even before the imposition of retaliatory EU measures. Indeed, economic analysis and research consultancy Oxford Economics estimates that a 20% tariff on European cars could knock 0.1% off US GDP in 2019, while causing the loss of 100,000 American jobs. If the tariffs are still in place in 2020, the cumulative job losses could reach almost 150,000.Trump’s EU car tariffs could cost 100,000 US jobsAccording to the report, higher prices on imported cars would decrease spending and investment by consumers and producers, affecting the auto sector and costing jobs. Higher parts prices would also negatively affect EU manufacturers with US factories.

EU officials are warning that the tariffs would damage the supply chains and economic health of auto firms on both sides of the Atlantic. EU carmakers in the US produce 2.9 million cars annually (over a quarter of US production), supporting over 540,000 American jobs.

The Oxford report cautioned that the estimated effects of the tariffs could be double the trouble. “Given the large supply chain multipliers in the automotive sector, and the knock-on effects from increased business uncertainty, the total shock to the economy could be twice as large.”  As such, the indirect  ripple effects throughout the auto sector’s extensive supply chain could double the estimated economic damage, while added business uncertainty could slow investment and household spending.

If enacted, the US tariffs would hit about €46 billion worth of imported EU vehicles, representing a sevenfold increase over the previously levied metal tariffs.

Trump’s stated rationale for the threatened tariff increase is an imbalance of current tariff rates, wherein US car exports are hit with 10% duties going into the EU, while EU cars imported into the US are only hit with a 2.5% tariff. Another vaguer reason is ‘national security, which an EU commission paper says is baseless, adding that the reasoning “harms trade, growth, and jobs in the US and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based western economic model.”