Trump threatens 20-per-cent tariff on European Union cars

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The European Union has imposed additional tariffs of 25% on products such as motorcycles, orange juice, bourbon, peanut butter, cigarettes and denim - part of its response to the Trump administration's tariffs on steel and aluminum exports from Europe.

The 28-nation EU was first expected to do so only next month but EU Trade Commissioner Cecilia Malmstrom said they would introduce "rebalancing" tariffs on about 2.8 billion euros' ($3.4 billion) worth of U.S. products this week. "And then, the European Union will hopefully act as united again as it has done now".

The EU trade commissioner acknowledged that it had targeted some iconic American items to increase political pressure on the US President and senior US politicians.

Felipe Munoz, global analyst at JATO Dynamics, said: "While German-made cars accounted for 4% of Q1-18 United States sales, American-made cars made only 1.3% of German registrations in the first quarter".

Together with U.S. tariffs against Mexico and Canada, the trade battles have raised the spectre of a global trade war, spooking financial markets that fear major consequences to the global economy.

The EU's retaliatory tariffs against the United States came into force this morning, affecting products such as bourbon whiskey, jeans, motorbikes and orange juice.

"The United States' decision to impose tariffs on Europe goes against that".

Malmstrom said that "we are left with no other choice".

Trump last week carried out a threat he made earlier this year by announcing he would impose $50 billion worth of tariffs on Chinese goods. But in the current politically charged climate, a trade war is now a reality, as the United States decided in March to adopt an aggressive protectionist policy to correct what the Trump administration believes is a crippling trade deficit between the US and several major trading partners.

The majority of U.S. goods targeted by the European Union, such as tobacco, Harley Davidson motorcycles, cranberries and peanut butter, will now carry a tariff of 25%.

Canada has announced that it will impose retaliatory tariffs on C$16.6 billion (S$17 billion) worth of USA exports from July 1.

Trump has repeatedly singled out German auto imports to the United States for criticism and reportedly told French President Emmanuel Macron he wanted to halt Mercedes-Benz models from driving down Fifth Avenue in New York City. While the results of that investigation are still weeks away, Trump raised the specter of tariffs on Twitter. BMW is one of South Carolina's largest employers, with more than 9,000 workers in the state.

The growing U.S. trade conflict with China hit financial markets hard, and Beijing vowed a firm response.

The biggest exporters of cars to the US are Canada and Mexico, followed by Japan and Germany.