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Citing non-compliance with trade agreement, but will the scope of retaliation expand after reviewing troop reduction in Germany?
Korea, competing with the EU in the U.S. market, may have an advantage for now, but it's hard 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) would be raised to 25% starting next week.
On his social media platform Truth Social, President Trump wrote, "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 the tariffs on passenger cars and trucks coming into the United States from the EU next week."
He added, "The tariff rate will rise to 25%."
President Trump also stated, "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 the 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 tariffs 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.
The agreement reached by both sides at the time was that the EU would purchase $750 billion worth of U.S. energy and military equipment and invest an additional $600 billion in the U.S., in return for which 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 the item-specific tariffs on EU-made passenger cars and trucks to their pre-trade agreement level by increasing them by 10 percentage points from 15%.
President Trump's sudden announcement of a tariff hike is interpreted as not unrelated to his complaints about the non-cooperation of key European allies amidst the war with Iran.
President Trump expressed considerable disappointment, saying "I will remember" that key member states of NATO, a military alliance between the U.S. and Western European allies, refused requests to dispatch warships to the Strait of Hormuz and did not allow U.S. and Israeli aircraft to use some military bases in Europe, leading to a tense relationship between the U.S. and European NATO members.
Previously, 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.
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 his calls for help.
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