President Donald Trump on Friday threatened to slam huge tariffs on imported cars from the European Union, a massive threat in the escalating trade conflict between the allies.
Trump had directed the Commerce Deparment to launch an investigation into imported autos in May, similar to the procedure that led to the steel and aluminum tariffs. While the results of that investigation are still weeks away, Trump raised the specter of tariffs on Twitter.
"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. "Build them here!"
Trump has long been fixated on imported cars. Former Trump adviser Gary Cohn recounted a story during a recent panel in which Trump asked why all cars in the US weren't made domestically.
Such a move would be a massive escalation of the already intense trade fight between the US and Europe. Leaders from the UK, Germany, and France slammed Trump's decision to hit the EU with steel and aluminum tariffs and the bloc responded with tariffs of their own.
In total, the US imported over $43 billion worth of vehicles for the transportation of people in 2017. So the size of the tariff would dwarf the steel and aluminum tariff, which hit a little over $7 billion worth of EU exports to the US.
European car manufacturers including BMW and Mercedes Benz have a large presence in the US. In fact, in September Mercedes announced that the company was investing $1 billion in their Alabama plant.
In an interview with Business Insider Germany last week, Bernhard Mattes, the president of German Association of the Automotive Industry (VDA), said that tariffs would not only hurt European automakers but the US economy as well. Mattes also said that German automakers could not subsist without access to the US market.
"No, because the US is both an important export market and a strong production base for us," Mattes said. "We produce more than 800,000 vehicles in North America and employ 116,500 people in 250 factories."
The move could also prompt a response from the EU, which would damage US automakers. In total, the US exported $10 billion worth of passenger vehicles to the US in 2017 .
Following the news, automakers' stocks took a hit with Ford and General Motors selling off sharply. European automakers including Daimler, the maker of Mercedes, and BMW also sank following the tweet.
It is unclear how the latest move could affect South Africa.
The US imported almost 37,000 cars from South Africa last year - it was the second biggest importer of SA vehicles, after the UK (54,400). In 2016, South Africa exported vehicles worth $1.6 billion to the US (R23.5 billion). Ford and Volkswagen plants in South Africa export vehicles to the US.
Currently, because of the African Growth and Opportunity Act (AGOA), South African car manufacturers have duty-free access to the US market. AGOA was launched under then president Bill Clinton in 2000, and South African car manufacturers have reaped enormous benefit over the years.