Trump Pushing Hard for 25 Percent Tariff on Imported Vehicles

The tariff could seriously damage the U.S. economy, say business executives and GOP leadership, as well as lead to revolts within the Republican party itself. But Trump is proceeding with his plans for the tariff despite all those speaking out against it.

Rather than listen to his advisers, Trump turned to Twitter Wednesday to criticize "people snipping [sic] at your heels during a negotiation." He also assures us that "Negotiations are going really well, be cool. The end result will be worth it!"

Trump meets with European Commission President Jean-Claude Juncker Wednesday to discuss tariffs both in Europe and in the U.S. It is the hope of advisors on both sides that Trump will be willing to back down from his hard-line stance on tariffs in the face of potential concessions from Europe. Currently, Europe places a 10 percent tariff on cars imported from the U.S., compared to 2.5 percent on cars imported to America from Europe.

Trump does seem willing to consider dropping the tariff in favor of concessions from Europe. On Tuesday he tweeted, "I have an idea for them. Both the U.S. and the E.U. [sic] drop all Tariffs, Barriers, and Subsidies! That would finally be called Free Market and Fair Trade! Hope they do it, we are ready - but they won't!"

However, a European official who spoke to The Washington Post under the condition of anonymity says otherwise, and that the EU is willing to consider concessions. One option would be to reduce tariffs between all major auto-exporting countries. Another option could be a deal between the United States and the EU to eliminate tariffs on industrial products, including cars, similar to what Trump's tweet suggested.

It remains to be seen what the EU will propose and how President Trump will react. But for an example of how a 25 percent tax on imported vehicles affects its sales in the U.S., look at the Chicken Tax. A 25 percent tariff was placed on imported light trucks in 1963 and remains in effect today. As a result, the light truck market has been owned exclusively by American-made trucks ever since. Even trucks wearing the badges of foreign companies, such as Toyota and Nissan, are built in the U.S. specifically to avoid this tax. It stands to reason that if a similar tax is imposed on all imported vehicles, only cars built in North America will remain remotely affordable against the more expensive competition.