European Union warns Trump that auto tariffs could lead to $300B retaliation

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In a letter to the U.S. Department of Commerce, BMW warned that more proposed tariffs would hurt the automaker's ability to expand its investment in the U.S., where tariffs on steel and retaliation from other countries have already driven up costs, according to a report by Reuters.

In a submission to the U.S. authorities, the European Commission warned: "Economic analysis confirms that an increased tariff on these products (cars and vehicle parts) will be harmful first and foremost for the USA economy".

Trump's taunt was the latest salvo in an escalating trade war that saw the EU slap duties on US-made jeans and Harley Davidson motorcycles in a tit-for-tat response to U.S. tariffs on European steel and aluminium exports.

As well as the tariff threats, the European Commission is also believed to have warned Trump that his behaviour could "result in yet another disregard of worldwide law" by the U.S., as well as saying that any auto tariffs would "damage further the reputation" of the country. "It's bad what they do to us".

The bloc argues that for some goods, such as trucks, United States import duties are higher.

President Donald Trump cited national security concerns for the previous tariffs. They don't want our farm products. China has also responded by taxing imports from the US.

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The EU submission also reports a 25 percent tariff could have a $13-14 billion negative impact on USA gross domestic product, Reuters reported. "They treat us very unfairly".

"We have right now a 2.5% tariff on all cars that come in and if you're an European Union auto seller you figure this into your business strategy, okay, we're selling to the USA - we have this relatively minor tariff, 2.5% to deal with, if that was to increase tenfold, it's gonna be a huge problem", said worldwide trade expert Alex Lawson.

Meanwhile, in a surreal twist to the trade war developments, Axios reported Sunday that a leaked draft Trump administration bill would see the US abandon the World Trade Organization (WTO) rules that limit the levels of tariffs that the country can impose on imports. "The procurement of military vehicles, e.g. the Mine Resistant Ambush Protected (MRAPs), is limited to a small group of defense contractors producing highly specialized vehicles for military purposes at a cost that would be far beyond the means of the average middle-class US household".

If the United States government imposes a higher tariff rate, the European Union said it would respond - as it did to the recent hike in import costs for steel and aluminium - with its own measures.

The new European Union tariffs came in retaliation to U.S. taxes on imported steel and aluminum, enacted earlier this year.