President Donald Trump
Justin Sullivan/Getty Images

  • European Union threatens to retaliate in growing trade war, if the US places tariffs on European cars, the FT reports.
  • The European Commission said in a letter that they would hit $300 billion of US goods with tariffs if needed.
  • Car components such as catalytic convertors are hugely important export items for South Africa.

The European Union has threatened to retaliate against US President Donald Trump in the escalating trade conflict developing across the Atlantic.

According to a report in the Financial Times, a letter sent by the European Commission to the US Department of Commerce says the EU could hit $300 billion – the equivalent of well over R4 trillion – of US goods with tariffs, if Trump follows through on his threats to place big taxes on European vehicles being imported in the US.

The EU's letter reportedly said that it has not yet decided on countermeasures to possible car tariffs, but said it is "likely" to apply them to "a significant volume of trade" in the event Trump imposes such tariffs.

In 2017 South Africa exported R50.3 billion of automotive components – and Germany was the top export destination for the industry. Vehicle and component exports represented 13.9% of South Africa’s total exports in 2017.

The potential new EU measures would apply "across sectors of the US economy", the letter stated.

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 international law" by the US, as well as saying that any auto tariffs would "damage further the reputation" of the country.

In recent months, Trump has sparked a global-trade conflict by placing or threatening punitive tariffs on hundreds of billions of dollars' worth of goods from China, Mexico, Canada, and the European Union. 

Trump recently turned his attention to the automotive sector, focusing on European manufacturers. "Based on the Tariffs and Trade Barriers long placed on the US and it great companies and workers by the European Union, 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 US," Trump tweeted back in June. "Build them here!"

While he has threatened auto tariffs, Trump has not yet followed through on them.

He did, however, double down on Sunday, saying in an interview with Fox News that: "The European Union is possibly as bad as China, just smaller... It is terrible what they do to us," before mentioning the "car situation."

In this context, Trump presumably alluded to his belief that European carmakers are taking away business from American manufacturers.

Receive a single email every morning with all our latest news: Sign up here.

Also from Business Insider South Africa: