Trump said in a recent speech in West Virginia that he didn't like the "deal" the US has with the EU on cars.

But as far as I know, there's no (separate) US-EU trade agreement on this, except perhaps the WTO schedules.

According to CNN:

The European Union charges a 10% tariff on cars imported from the United States. But 85% of cars assembled in the United States and sold in Europe are exempted because they contain European parts. The United States charges a 2.5% tax on cars imported from Europe.

Besides that, there's apparently a 25% US import tariff on light trucks (which doesn't seem to have an EU equivalent):

One catch is that the Europeans also want a 25% U.S. tax on imports of light trucks—pickup trucks, sport-utility vehicles, and big vans—scrapped. Abolishing this relic of the Johnson administration could alienate U.S. auto workers, a core constituency for Mr. Trump in the midterms this fall. Mr. Ross didn’t comment on whether the U.S. would be willing to cut tariffs on trucks.

From the latter quote, at least some these tariffs are pretty ancient. Basically, when were the current car tariffs decided (on both sides of the Atlantic) and in what context?

N.B. It seems that the reason why the EU doesn't bother with a light truck tax is that these don't sell well, at least in Germany:

But it’s not the price that really matters, but fundamental differences in taste: the three best-selling models in the US are pickup trucks from Ford, Chevrolet and Dodge. In Germany, there is not a single pickup among the 50 most popular models.

But I'm not sure that's entirely correct because it doesn't mention SUVs.

According to another German analysis, not specific to cars, alas:

“The EU is by no means the paradise for free traders that it likes to think,” said Gabriel Felbermayr, director of the ifo Center for International Economics, a division of the Munich-based ifo Institute. The European Union actually comes off as the bigger offender when compared to the US, he added. The unweighted average EU customs duty is 5.2 percent, versus the US rate of 3.5 percent, according to ifo’s database. [...]

The disparity dates back a quarter-century to the Uruguay Round of trade talks under the aegis of the General Agreement on Tariffs and Trade (GATT), ifo said in a new study. A lot has changed in the meantime. The EU has grown from 12 members to 28. GATT became the World Trade Organization and enrolled more than 40 new members, including China and Russia. The Doha round of trade talks started in 2001 to take account of these changes, but the talks collapsed as developing economies resisted lowering their own tariffs.

So the last "deal" on cars was the Uruguay Round? Did it decide anything new with respect to cars or just grandfathered in even older decisions/agreements?

China apparently reletened [to some extent] this year and cut its car import tariffs to 15% (from 25%) and also gave up its joint-venture requirements in the sector (but that only starting from 2022, except for electric cars, for which this joint-venture restriction is lifted and the end of 2018); these measures are going to mainly benefit German, Japanese and then US car manufacturers (in this order) according to Bloomberg.


1 Answer 1

  1. The source from CNN is inaccurate. Indeed, EU has a duty drawback program that exempts from 10% duty all EU components inside U.S. cars entering EU market. But typically most of the content inside U.S. car is from U.S. so no tariff reduction.

  2. The 25% truck tariff is a "chicken tax" and was raised by U.S. in 1970s as a result of a trade war with the EU. The tariffs have been levied by U.S., EU and other nations throughout the history but now they are capped to specific ceilings under WTO's Uruguay Round agreements.

  3. EU's tariff on pickup trucks ranges from 3% to 22%. SUVs are cars and the EU tariff on cars is 10%.

  • 4
    I removed your last line because it made your answer look like an advert (you can add it to your profile though.) It wasn't me who downvoted your answer, but I suspect that line played a role. I'll have to think about the rest of your answer, but you could make that easier by adding links/references to support your first two points. Aug 25, 2018 at 12:39
  • I am pretty sure the EU wasn't implied in any trade war in the 1970's, since it was yet to be created. Maybe you meant the European Economic Community : en.wikipedia.org/wiki/European_Economic_Community
    – Evargalo
    Aug 27, 2018 at 12:43

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