US zeroes in on Europe's cars in battle to fix trade deficit

US Commerce Secretary Wilbur Ross said autos share equal blame with China for the US trade deficit, an indication that European carmakers could soon be hit with tariffs.

"The reason autos are very important to our trade picture is about half of our trade deficit comes from the single product, automotive, and about the other half of our trade deficit comes from a geographic area and that’s called China," Ross said at a press conference in Luxembourg on 10 May.

The Commerce Department sent Donald Trump its findings of a probe into the national-security risks of auto imports in February.

Ross said he expects the US president to rule on tariffs by 18 May. Levies on cars and parts imported to the US would especially hit Germany, and the European Union has vowed to retaliate.

Ross made it clear that the US trade balance is the driving motive behind the focus on the auto industry.

"In order to reduce our trade deficit -- one of the big objectives of this administration -- we need to deal with China as an entity, and we need to deal with automotives as a product line," he said.

Trump roiled global markets this week by boosting tariffs on $200 bn of Chinese goods and threatening more, prompting China to say it will be forced to retaliate. The renewed trade tensions could derail efforts by the countries to reach a deal.

Ross said the US would be fine if the negotiations fail.

Trade talks with China "will have either one of two outcomes: either we will reach a mutually agreeable arrangement, or we will impose the higher tariffs that were described by President Trump," Ross said.

"The United States is comfortable with the outcome whichever way it goes, but we would be happy if we could have an agreement with China," he said.