Trump reignites trade war threats, says Europe is 'as bad' as China

US President Donald Trump has indicated further trade skirmishes are possible with the European Union, saying the bloc is “as bad” as China regarding their dealings with America.

President Trump, in an interview with Fox News, complained about the treatment the US gets from Europe, especially regarding the “car situation” and dismissed objections that threatening the EU with tariffs could be counterproductive for the local economy.

"he European Union is possibly as bad as China, just smaller. It is terrible what they do to us,” he said.

The President added: "They send a Mercedes in, we can't send our cars in. Look what they do to our farmers. They don't want our farm products. Now in all fairness they have their farmers.. But we don't protect ours and they protect theirs."

The EU recently warned the US that it could be hit with tariffs of as much as $300bn if it went ahead with tariffs on car imports, said the Washington Post in a report.

European Commission said overnight: “Protective measures would undermine US growth, negatively impact job creation, and not improve the trade balance and damage further the reputation of the United States.”

Up until now, the US has imposed a 25% tax on steel and 10% on aluminium imports from the EU to which Brussels responded with 25% levies on almost 200 American products.

Now, the Trump administration is investigating whether tariffs could be placed on imported cars.

This week will be a critical for the trade war as Canada imposed tariffs on $12.6bn of US products on Sunday and China is set to set tariffs on $34bn worth of American goods, including soybeans, on Friday, the same day that Trump plans to tax an additional $34bn worth of Chinese items.

Trump will also face pressure from his southern neighbours after leftist Andrér Manuel López Obrador, known as AMLO, won the Mexican general elections on Sunday. The new leader is unlikely to offer a revised NAFTA agreement by the end of the year that would please Trump.

Reflecting on the impact for financial markets, analyst Jasper Lawler at London Capital Group said on Monday: “A ramping up of trade war headlines over the weekend, such as a strong warning of retaliation from the EU and a potential currency war with China (US), will ensure that the fear of an all out global trade war is central in trader’s mind, as the session begins on Monday. Markets have a tendency to normalise risk events that hang around long enough, which could explain the fairly limited moves on the market so far this morning.”