Trade war escalates: Trump threatens to slap retaliatory tariff on EU cars

US President Donald Trump kept up pressure on trading partners on Saturday, threatening European automakers with a tax on imports if the European Union retaliates against his plan to slap tariffs on aluminium and steel.

Trump's tweet suggested he is refusing to yield to US business interests and foreign trading partners alarmed at the prospect of a trade war that rattled financial markets this week.

"If the E. U. wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US," Trump wrote on Twitter. "They make it impossible for our cars (and more) to sell there. Big trade imbalance!"

If the E. U. wants to further increase their already massive tariffs and barriers on U. S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.

S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!

— Donald J. Trump (@realDonaldTrump) March 3, 2018

The United States imposes a 2.5-per cent tariff on cars assembled in Europe and a 25-per cent tariff on European-built vans and pickup trucks. Europe imposes a 10-per cent tariff on US-built cars.

Trump criticized Europe in remarks at a fundraiser, according to video posted online Saturday, and suggested they would not increase tariffs.

"The European Union: brutal. They've been brutal to us," Trump said at a Florida fundraiser. "They've banded together in order to beat the United States in trade."

Trump did not respond to questions about tariffs or other topics upon returning to the White House Saturday.

In a speech Friday night at Harvard University, European Commissioner for Competition Margrethe Vestager said the EU will respond to the tariffs "to defend European industry, and the world trading system," according to a copy of her remarks. She called the Trump action "one-sided protectionist measures, which hurt, not just jobs, but the whole system of rules that makes our global economy work."

German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW employs more than 9,000 workers in South Carolina and is one of the state's largest employers.

The United States accounts for about 15 per cent of worldwide Mercedes-Benz and BMW brand sales, while it accounts for five per cent of VW brand sales and 12 per cent of Audi sales.

The United States had a $22.3 billion automotive vehicle and parts trade deficit with Germany in 2017 and a $7 billion deficit with the United Kingdom, according to US government data.

Last year, Germany's automotive trade association said "the United States would be shooting itself in the foot by imposing tariffs or other trade barriers."

Trump's threat comes amid mounting transatlantic tension on trade.

On Thursday, Trump said the United States would apply duties of 25 per cent on imported steel and 10 per cent on aluminium to protect domestic producers.

Major automakers say the move will hike the cost of cars and trucks.

The next day, European Commission President Jean-Claude Juncker told German television that "We will put tariffs on Harley-Davidson (motorcycles), on bourbon and on blue jeans - Levis."

Canada also has said it will retaliate for any tariffs on steel and aluminium.

Trump had tweeted on Friday that trade wars are good and "easy to win," roiling US financial markets.

In January 2017, Trump warned German car companies he would impose a border tax of 35 per cent on vehicles imported to the US market.