Trump's snub to EU overtures on tariff cuts clobbers carmakers

European car stocks fell and the region’s politicians expressed disappointment after US President Donald Trump rejected a proposal to eliminate tariffs on auto imports and reiterated his threat to pull out of the World Trade Organisation, in a move that would upend commerce globally.

A gauge of the automobiles and car-parts sector in Europe fell as much as 1.7% on Friday morning, with Continental and Volkswagen among the companies leading the losses. European stocks fell and US equity futures pointed to a dip at the open.

European Union’s trade chief Cecilia Malmstrom said on Thursday that the bloc was “willing to bring down even our car tariffs to zero, all tariffs to zero, if the US does the same,” in the latest effort to appease US administration complaints about alleged EU protectionism. Asked in an interview with Bloomberg to comment on the offer, Trump said “it’s not good enough” and reiterated that the bloc “is almost as bad as China, just smaller”.

Trump’s remarks cast doubt on the longevity of an agreement struck this summer with EU Commission President Jean-Claude Juncker, intended to stave off a broader trade war between the US and Europe after the US president imposed tariffs on imported steel and aluminium earlier this year. The trans-Atlantic dispute has rattled markets and shaken the international order created after World War II.

“As is the case with ceasefires, they’re sometimes at risk but they will be upheld,” Juncker told German broadcaster ZDF when asked to comment on Trump’s interview with Bloomberg. Juncker added that he expects the US to adhere to an agreement to refrain from new tariffs as long as the two sides are negotiating a trade deal.

Trump told Bloomberg that eliminating tariffs on US car imports would do little to help the US car industry, as European consumers would still not buy American cars.

“Their habits, their consumer habits are to buy their cars, not to buy our cars," he said.

Euro Reaction

In his broadside against the EU, Trump also repeated accusations that the bloc is manipulating its currency.

“We’re competing against not only the yuan, we’re competing against the euro," he said. “They keep dropping, dropping, dropping.”

The single currency was little-changed against the US dollar on the latest remarks.

“It’s very regrettable that from the US side there is a tendency to escalate the trade war, especially with China but also with Europe,” European Central Bank (ECB) policy maker Olli Rehn said in a Bloomberg Television interview on Friday.

“The ECB certainly is not manipulating the euro,” said Rehn, who is governor of the Bank of Finland.