According to a senior EU official, the European trade block is targeting U.S. companies Caterpillar Inc., Xerox Corp. and Samsonite International for retaliatory duties if President Donald Trump follows through with his threats of tariffs against EU car imports.
U.S. automakers on Wednesday made a plea to Trump to not go through with the tariffs because it could weaken the global auto industry, inflate car prices and trigger a backlash in Congress.
“The economic fallout would be significant, with auto tariffs hurting the global economy by distorting prices and creating inefficiencies, and the impact would reverberate across global supply chains,” Moody’s Investors Service said in a report. “The already weakening pace of global expansion would magnify global growth pressures, causing a broader hit to business and consumer confidence amid tightening financial conditions.”
The commission said last month the EU would hit 20 billion euros ($22.7 billion) of U.S. products should Trump impose duties on European cars and auto parts on the same national-security grounds that he invoked last year to tax foreign steel and aluminum. The commission has declined to disclose any U.S. products that would be subject to EU duties prompted by any U.S. automotive levies.
“Should there be tariffs on car and car parts, which we don’t want, we have started internally to prepare a list of re-balancing measures,” EU Trade Commissioner Cecilia Malmstrom told reporters on Friday in Bucharest, after a meeting of the bloc’s commerce ministers. “There is full support to do this.”
Caterpillar, which announced earnings last month, had its biggest profit miss in a decade on worries over trade tensions. The Deerfield, Illinois-based company also issued a 2019 profit forecast range which, at the low end, was below the average of analysts’ expectations.
Shares of Caterpillar fell as much as 1.1 percent in early trading before U.S. markets opened on Friday, while Xerox dipped as much as 3.9 percent. S&P 500 futures pared their gains.
If the U.S. raises tariffs on vehicles and auto parts, it will make the levies imposed on steel and aluminium last year “look like a picnic,” Mike Jackson, the CEO of car-dealership group AutoNation, said in an interview.
“It’s almost so unthinkably, draconianly disruptive to everything he’s trying to do with the economy that, at the end of the day, I don’t believe it will happen,” Jackson said, referring to Trump, adding that higher car duties would be “the nuclear tariff option.”