Will taxing EU-made cars at 25% invert the US-EU trade deficit? [closed]

Question

Trump claimed at a rally in West Virginia yesterday that taxing European Union cars at 25% would take the 151bn dollars trade deficit (with the EU) and turn it on its head, i.e. into a US surplus of the same size.

I cannot find a transcript, but the sequence where he says this is quite short https://youtu.be/3dFvGZToi2w?t=4846 from 1:20 to 1:23 or so for full context; the actual claim is around 1:22.

Is Trump's claim likely to be true? Since this is a claim that partly involves forecasting, are Trump's premises based on facts?

The EU commissioner for trade has said that

EU car and car part exports to the US are worth more than 50 billion euros, every year.

ACEA estimates the value of complete cars exported to the US at 37.4bn euros. So the EU-proffered figures seem in reasonable concord (with each other). However I don't discount the possibility that Trump might be using different (larger) estimates for this. But have such more expansive estimates been advanced publicly (e.g. by any of Trump's economic advisers)?

Trump has admitted to making up some data in other trade negotiations, e.g. with Canada. So this claim with respect to the EU could well be a tactic just like that. Is there any indication this might be the case (again)?

Answer 1

It is unlikely to have the claimed impact for two reasons that are largely ignored.

1. Tariffs are just a tax that gets added on certain goods that come into the country causing consumers to pay more for the goods. This is both from the tariff being passed on to consumers and goods that are not under the tariff can charge more and still be cheaper.

   Investing Answers

   A tariff is a tax on imports or exports. Money collected under a tariff is called a duty or customs duty. Tariffs are used by governments to generate revenue or to protect domestic industries from competition.

   Import and export taxes make it more expensive for users of foreign goods, causing a decline in imports, a decline in the supply of the good, and a resulting increase in the price of the good. The price increase usually motivates domestic producers to increase their output of the product.

   Some economists argue that the resulting higher consumer prices, higher producer revenues and profits, and higher government revenues make tariff s a way to effectively transfer money from consumers to government treasuries. Some economists also argue that tariffs interfere with free market ideals by diverting resources to domestic industries that are less efficient than foreign producers.

2. In the case of cars foreign companies they are actually making more cars domestically than domestic companies and some of the foreign companies have their largest plants in the states.

   10 Foreign Cars Made In The US (And 10 American Cars That Aren't)

   Forbes

   Foreign motor vehicle manufacturers are now making more cars and trucks in the United States than General Motors, Ford and all other U.S. companies, a first in U.S. history. That's based on projections for the first quarter of 2018 from WardsAuto.com, as reported recently in the Wall Street Journal.

   That's because the largest importer of motor vehicles into the United States will not be Japan or South Korea or even Germany. It will be Canada, as has been the case since 2010. Haven't driven a Canadian car lately, or even seen one? That's because there's another odd twist to this story, since most but not all of these vehicles are U.S. vehicles being manufactured just across the Ambassador Bridge from Detroit in Ontario.

   So, in the White House view, a GM or Ford undergoing assembly in Canada is bad but a South Korean Kia being manufactured in Georgia is good. Even if the profits from the former return to the United States while the profits from the latter return to South Korea.