President Donald Trump says the US "will simply apply a tax" on cars made in Europe if the EU retaliates against the trade penalties he's seeking on imports of steel and aluminium.

US President Donald Trump and first lady Melania Trump step from Air Force One as they arrive in West Palm Beach, Florida, US, March 2, 2018.
US President Donald Trump and first lady Melania Trump step from Air Force One as they arrive in West Palm Beach, Florida, US, March 2, 2018. (Reuters)

US President Donald Trump kept up pressure on trading partners on Saturday, threatening European automakers with a tax on imports if the EU retaliates against his plan to slap tariffs on aluminium and steel.

Trump's threat comes amid mounting transatlantic tension on trade as the US president said Thursday the United States would apply duties of 25 percent on imported steel and 10 percent on aluminium to protect domestic producers.

"If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars which freely pour into the US,"Trump tweeted.

He's also railing about "very stupid" trade deals by earlier administrations and says other countries "laugh at what fools our leaders have been. No more!"

Trump's tweet showed he is refusing to yield to US business interests and foreign trading partners alarmed at the prospect of a trade war that rattled financial markets this week.

'European Union: brutal'

The United States imposes a 2.5-percent tariff on cars assembled in Europe and a 25-percent tariff on European-built vans and pickup trucks. Europe imposes a 10-percent tariff on US-built cars.

Trump criticised Europe in remarks at a fundraiser, according to video posted online Saturday, and suggested they would not increase tariffs.

"The European Union: brutal. They've been brutal to us," Trump said at a Florida fundraiser. "They've banded together in order to beat the United States in trade."

Retaliation of trade partners

The EU is promising retaliation against American exports if Trump follows through, as he says he will next week.

The next day, European Commission President Jean-Claude Juncker told German television that "We will put tariffs on Harley-Davidson (motorcycles), on bourbon and on blue jeans - Levis."

Canada also has said it will retaliate for any tariffs on steel and aluminium.

Trump had tweeted on Friday that trade wars are good and "easy to win," roiling US financial markets.

In January 2017, Trump warned German car companies he would impose a border tax of 35 percent on vehicles imported to the US market.

Global network of automakers

German automakers Volkswagen AG, Daimler AG and BMW AG build vehicles at plants in the United States. BMW employs more than 9,000 workers in South Carolina and is one of the state's largest employers.

The United States accounts for about 15 percent of worldwide Mercedes-Benz and BMW brand sales, while it accounts for 5 percent of VW brand sales and 11 percent of Audi sales.

The United States had a $22.3 billion automotive vehicle and parts trade deficit with Germany in 2017 and a $7 billion deficit with the United Kingdom, according to US government data.

Last year, Germany's automotive trade association said "the United States would be shooting itself in the foot by imposing tariffs or other trade barriers."

Major automakers say the move will hike the cost of cars and trucks.

Source: TRTWorld and agencies