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Cited non-compliance with trade agreement, but following review of U.S. troop reduction in Germany, will the scope of retaliation expand?
Korea, competing with the EU in the U.S. market, may have an advantage for now, but it's difficult to be complacent.
U.S. President Donald Trump announced on the 1st (local time) that tariffs on passenger cars and trucks from the European Union (EU) will be increased to 25% starting next week.
President Trump wrote on the social media platform Truth Social today, "Based on the fact that the EU is not complying with the trade agreement we fully agreed upon, I am pleased to announce that I will be increasing tariffs on passenger cars and trucks imported into the United States from the EU next week."
He further stated, "The tariff rate will rise to 25%."
President Trump also said, "It is fully understood and agreed that if they (the EU) produce passenger cars and trucks in U.S. factories, no tariffs will be imposed."
President Trump, who launched his second-term administration in January last year, imposed a 25% item-specific tariff on foreign-made automobiles starting April 3 last year. Accordingly, EU-made cars imported into the U.S. were subject to a 27.5% tariff, including a basic tariff of 2.5%.
A day earlier, on April 2 last year, President Trump had announced the imposition of a 20% reciprocal tariff (differentiated tariff by economic entity) on the EU.
Subsequently, both the U.S. and the EU entered into negotiations for a new trade agreement, and on July 27 last year, President Trump and EU Commission President Ursula von der Leyen met in Scotland, UK, to conclude trade negotiations, significantly lowering tariffs.
At that time, the agreement between the two sides was that the EU would purchase $750 billion worth of U.S. energy and military equipment and additionally invest $600 billion in the U.S., while the U.S. would lower reciprocal tariffs on the EU to 15% and uniformly reduce item-specific tariffs on automobiles, etc., to 15%.
Ultimately, President Trump's announcement today is to restore item-specific tariffs on EU-made passenger cars and trucks to pre-trade agreement levels by increasing them by 10 percentage points from 15%.
President Trump's sudden announcement of tariff increases is interpreted as not unrelated to his complaints about the non-cooperation of major European allies amidst the war with Iran.
President Trump expressed considerable disappointment, stating "I will remember" regarding major member states of the North Atlantic Treaty Organization (NATO), a military alliance between the U.S. and Western European allies, refusing requests to dispatch warships to the Strait of Hormuz and not allowing U.S. and Israeli aircraft to use some military bases in Europe, leading to a tense relationship between the U.S. and European NATO member states.
Earlier, on the 29th of last month, President Trump also stated that he was considering reducing U.S. troops stationed in Germany.
Following President Trump's announcement today, the EU is expected to be at a disadvantage in competition with Japanese and Korean companies, which are still subject to a 15% tariff in the U.S. automobile market for the time being.
However, there are also observations that it is too early to be complacent about President Trump's 'indirect' retaliatory measures through tariffs, given that Japan and Korea also did not actively respond to President Trump's requests for help.
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