How bad could car tariffs hit?
Tariffs could come as soon as next week on all auto imports to the US, excluding Canada and Mexico.
Europe would be particularly hard hit, especially German auto makers who wilted on the news. In the bigger picture, Barlcays estimates that US tariffs would cut EU growth to 1.2-1.3% from 1.6%.
That would be enough to trigger an ECB reaction, they say but they don't weigh in on the FX impact.
They also note that autos and parts represent a whopping 33% of the EU's trade surplus with the US
As for global growth it would be hit by about 0.1 percentage points with some of the downsides offset by fresh investment to move production. China is a particular wild card. They are the biggest car market in the world with 25% of global sales but how they respond is highly uncertain.
"Besides the need to include direct and indirect effects on growth from protectionism, key assumptions have to be made, such as the duration of a trade war and the response to shock, including monetary and fiscal policy (eg, how increased revenues from tariffs are used), which are very difficult to predict," the report says.
