Daily Management Review

Tariffs That Has Biggest Economic Impact Now Focus Of Trump Administration


Even while European Commission President Jean-Claude Juncker meets up with United States President Donald Trump to discuss trade and tariffs, the threatened tariffs on the auto sector would assume the greatest importance because that sector is believed to have the most economic impact.
However, whether Trump would be able to be convinced by the EU offer is unclear. The US Commerce Department is currently investigating whether importing cars and auto parts creates any threat to the national security of the US and it is slated to recommend whether it would be fejustif8ied to impose the proposed 20 to 25 percent tariffs on auto imports.
"The meeting with Juncker from the EU is about whether they'll be able to move on a deal for a better agreement on autos," said Michael Arone, chief investment strategist at State Street Global Advisors. "I just think at this point, it's a bit too early to tell. I don't think there will be a clear resolution [Wednesday]."
"I'm of the mind that Trump continues to use tariffs as a means to gain leverage in trade discussions," said Arone. He said if there is no real outcome, the market will not react, but it could move either way if there is a seeming breakdown or a declaration of success.
It has been reported that before flying off to Washington, Juncker had consultation with the heads of Germany, France, the Netherlands and Austria.
According to some analysts, it is likely hat some progress being made by it on trade issues would liked to be shown by the Trump administration after the stalling of talks with China. Juncker is going Washington with a significant offer on trade, said White House top economic advisor Larry Kudlow last week.
"Our sense is that Juncker is coming to the U.S. to kick the tires on what is possible. But EU divisions between Germany and France on what should be offered as well as global trade rules make getting a deal difficult," wrote Daniel Clifton, head of policy research at Strategas Research. "We don’t believe there is a real national security case for imposing these tariffs and there is very little support. But the President is vowing action if no deal can be reached and this is worth watching, given how large the tariffs are."
According to experts and economists, the greatest impact on the world economy would be dealt by attacking the auto industry with tariffs since the global supply chain of the industry is interconnected. Consumers would also be impacted by tariffs.
"We do have a pretty integrated global supply chain, and I think you’re starting to see more and more complaints among manufacturers," said Stephen Stanley, chief economist at Amherst Pierpont. The US has already slapped the EU with steel and aluminum tariff.

"In the PMI for Europe, they're seeing increasing parts and supply costs, and that's ultimately going to go into prices," said Stanley. "For the global economy, it would definitely be a step backward, and we'd end up in this vicious cycle of tariffs and retaliation and lots of rounds of that, but it's hard to know exactly where this is going to end in a couple of years."
According to a recent study by the Peterson Institute for International Economics, if the Trump administration imposes tariffs equally and without any exception on auto and auto parts, consumers would feel the brunt of the impact as it is anticipated that the price of some of the most popular cars can increase between $1400 to $7000. Even cars that are made in the US would become costlier because a large part of them contain parts that are imported.