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Citing 'non-compliance with trade agreement', "EU will be pressured to relocate factories more quickly"
Possibility of expanding scope of retaliation against EU following review of US troop reduction in Germany
Korea, competing with EU in the US market, will be advantageous for a while, but it will be difficult to feel relieved
US President Donald Trump announced on the 1st (local time) that he would raise tariffs on passenger cars and trucks from the European Union (EU) to 25% starting next week.
President Trump wrote on social media Truth Social that day, "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 raising tariffs on passenger cars and trucks coming into the United States from the EU next week."
He added, "The tariff rate will increase to 25%."
President Trump also stated, "It is fully understood and agreed that if they (the EU) produce passenger cars and trucks in US factories, no tariffs will be imposed."
President Trump, who launched his second-term administration in January last year, imposed a 25% tariff on foreign cars by item starting April 3 last year. Accordingly, EU-made cars imported into the US were subject to a 27.5% tariff, including a basic tariff of 2.5%.
A day earlier, on April 2 last year, President Trump announced the imposition of a 20% reciprocal tariff (differentiated tariff by economic entity) on the EU.
Subsequently, both the US 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 the trade negotiations, significantly lowering tariffs.
At that time, the agreement between the two sides was that the EU would purchase US energy and military equipment worth 750 billion dollars and additionally invest 600 billion dollars in the US, while the US would lower reciprocal tariffs on the EU to 15% and uniformly reduce item-specific tariffs on cars, etc., to 15%.
Ultimately, President Trump's announcement today is to restore the item-specific tariffs on EU 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 being primarily caused by 'non-compliance with the trade agreement', as he himself stated.
It is as if the EU has repeatedly pulled out the tariff increase card, citing issues with the speed of implementation of US investments that the EU was supposed to make as a condition for tariff reduction. Previously, in January, he also threatened to raise tariffs on Korea, citing delays in the passage of the Special Act on Investment in the US in the Korean National Assembly.
Meeting with reporters at the White House today, President Trump, regarding the decision to raise tariffs on EU cars and trucks, cited 'non-compliance with the agreement' and said, "This applies to billions of dollars worth of imports coming into the US, and this will force them to relocate their production facilities much more quickly."
He continued, "Currently, car factories worth over 100 million dollars are being built in the US," adding, "All countries, including Japan, Korea, Canada, and Mexico, are building factories in the US, but the EU is not complying with the agreement."
It is also interpreted as not unrelated to his complaints about the non-cooperation of major European allies during the war with Iran.
President Trump expressed considerable disappointment, saying "I will remember" about the refusal of major member states of the North Atlantic Treaty Organization (NATO), a military alliance between the US and Western European allies, to dispatch warships to the Strait of Hormuz and their refusal to allow US and Israeli aircraft to use some military bases in Europe, leading to a tense relationship between the US and European NATO member states.
Earlier, on the 29th of last month, President Trump also stated that he was considering reducing US 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 US automobile market for the time being.
However, there is also a view that it is too early to feel relieved about President Trump's 'indirect' retaliatory measures through tariffs, given that Japan and Korea also did not actively respond to President Trump's request for help.
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