By David Shepardson
WASHINGTON (Reuters) - President Donald Trump on Friday threatened to escalate a trade war with Europe by imposing a 20 percent tariff on all U.S. imports of European Union-assembled cars.
Trump posted his threat on Twitter the day European Union reprisals took effect against U.S. tariffs on European steel and aluminum. The EU targeted $3.2 billion in American goods exported to the 28-member bloc.
"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 U.S. Build them here!" Trump wrote.
A month ago, the administration launched a probe into whether auto imports pose a national security threat.
The United States currently imposes a 2.5 percent tariff on imported passenger cars from the European Union and a 25 percent tariff on imported pickup trucks. The EU imposes a 10 percent tariff on imported U.S. cars.
German automakers Volkswagen AG <VOWG_p.DE>, Daimler AG and BMW AG build vehicles at plants in the United States. Industry data shows German automakers build more vehicles in southern U.S. states that voted for Trump than they ship to the United States from Germany.
The European Autos Stocks Index fell sharply after Trump’s tweet and closed down 0.5 percent. Shares of U.S. automakers Ford Motor Co and General Motors Co fell immediately after Trump's tweet but rebounded and closed higher.
The Commerce Department has scheduled two days of public comments in July in its probe of the national security implications of imported automobiles and auto parts. Commerce Secretary Wilbur Ross said Thursday the department aims to wrap up the probe by late July or August, but added the probe is in its "early stages."
Last month, Evercore ISI said in a research note that a 25 percent import tariff on auto imports "would pretty much destroy the business of importing cars from Europe/China" to America.
Major automakers and at least two dozen auto suppliers are gearing up to file written comments sharply opposing the tariffs before a June 29 deadline. U.S. auto executives said privately they have spent months looking at the potential impacts to sales of new tariffs, and they view the presidential tweet as a sign significant new tariffs appear likely.
Trump has launched or threatened an array of trade measures, saying he aims to create U.S. jobs and protect domestic industries.
He has threatened duties on up to $450 billion of imports from China. Such a move could raise prices for American consumers and businesses and hit global supply chains for industries like carmakers and electronics. Chinese reprisals have hit American farmers already.