Trump trade row: EU considers tax on Levi jean imports

Levi jeans and bourbon could be hit with a 25% import tax by the European Union if President Donald Trump imposes tariffs on European steel and aluminium.

Cecilia Malmström, EU Commissioner for Trade, told the BBC the items were on a draft list of US goods to be taxed.

Last week, the President said he would tax imported steel, declaring: "trade wars are good".

His comments have prompted reaction around the world.

Prime Minister Theresa May expressed her concern in a telephone call to Mr Trump on Sunday.

Levi Strauss came out strongly against trade barriers.

A company spokesperson told the BBC: "We support open markets and free trade where everyone plays by the rules. Unilateral tariff impositions risk retaliation and destabilizing the global economy, in which case American brands, workers and consumers will ultimately suffer."

What is the EU considering?

• Kamal Ahmed: Why Trump is playing tough on trade

Ms Malmström told the BBC: "We are looking at possibilities to retaliate, meaning we will also put taxes or tariffs on US imports to the European Union."

She said they would wait for the final decision, but added that "we are of course preparing. This has been in the air for some time". She said that if the US went ahead and applied taxes to European steel, the EU would take the issue to the World Trade Organization (WTO).

Ms Malmström stressed that Europe was looking to respond "to retaliate but not escalate".

But any action by Europe is likely to provoke further action by the US.

Has there been any impact on European business so far?

Shares in major European car makers fell on Monday following a threat by US President Trump to tax their vehicles.

Mr Trump said if the EU "wants to further increase their already massive tariffs and barriers on US companies... we will simply apply a tax on their cars".

The US is an important market for cars built in the country. US demand for British-built cars rose by 7% in 2017, with exports reaching almost 210,000, and the US is now the UK's second-largest trading partner after the EU, taking 15.7% of car exports.

• Why Trump is hanging tough on trade

• What would China do in a US trade war?

• Five reasons why trade wars aren't easy to win

• Steel tariffs: What impact will they really have?

What does Trump want to do and why?

Mr Trump has decried the "$800 Billion Dollar Yearly Trade Deficit because of our 'very stupid' trade deals and policies", and vowed to end it.

On Thursday, he said steel imports would face a 25% tariff and aluminium 10%.

Then came Saturday's threat on EU-made cars.

In January, he had already announced tariffs on solar panels and washing machines.

What are US's trading partners making of this?

Downing Street said that during Mrs May's call to President Trump on Sunday she raised "our deep concern at the President's forthcoming announcement on steel and aluminium tariffs, noting that multilateral action was the only way to resolve the problem of global overcapacity in all parties' interests."

Zhang Yesui, spokesperson for China's National People's Congress, said it was natural that "some friction will exist" between the US and China, given the volume of trade between them surpassed $580bn (£420bn) last year.

But he said China would take "necessary measures" if its interests were hurt.

Canada said tariffs would cause disruption on both sides of the border. Prime Minister Justin Trudeau said he was "confident we're going to continue to be able to defend Canadian industry".

EU trade chiefs could apply 25% tariffs on around $3.5bn of imports from the US - targeting iconic US exports including Levi's jeans, Harley-Davidson motorbikes and Bourbon whiskey.

Brazil, Mexico and Japan, that have said they will consider retaliatory steps if the president presses ahead with his plan next week.

The move has also been strongly criticised by the International Monetary Fund and the WTO.

• Where Trump stands on world trade

Has Trump got political support at home for a trade war?

A number of Republicans have questioned the wisdom of the tariff proposal and have been urging the president to reconsider.

Senator Orrin Hatch said American citizens would be made to pay.

Senator Ben Sasse agreed that "kooky 18th Century protectionism will jack up prices on American families".

Jason Furman, former chairman of the Council of Economic Advisers under President Obama, told the BBC the proposed tariffs were "a very costly and inefficient way to help a small number of people".

He says consumers are likely to face higher prices. "This could be bad or awful, there's no scenario under which it's good."

Industry bodies like the US Motor and Equipment Manufacturers Association have expressed deep concern.

But steelworkers in Pennsylvania and Indiana will welcome Mr Trump's comments.

Trade Partnership, a Washington-based economics and consulting firm, released an analysis predicting that the tariffs would lead to net loss of about 146,000 jobs in the US, or more than five for every one gained.

Is there room for compromise?

President Trump hinted on Monday that if the US achieved a better deal for itself in the latest North American Free Trade Agreement (Nafta) he would abandon plans for a tariff on Canada's and Mexico's steel imports.

The rest of the tweet is a reference to Canada and US farmers.

All three major US stock indexes - the Dow Jones, S&P 500 and Nasdaq - rose by 1% or more on Monday, as investors interpreted Mr Trump's comments as a sign that his plan for tariffs remains up for debate.

Substantial changes to the Nafta agreement are not likely to happen soon, however. The current round of Nafta talks, about updating the 24-year old treaty, finished on Monday with little progress.

This is the seventh round of eight scheduled meetings. The next is planned for April.

Is Trump right about the trade imbalance?

The US imports steel from more than 100 nations and brings in four times more steel from abroad than it exports.

Since 2000, the US steel industry has suffered, with production dropping and the number of employees in steel work falling.

The US is the largest export market for EU cars - making up 25% of the €192bn (£171bn; $237bn) worth of motor vehicles the bloc exported in 2016 (China was second with 16%).