The Volkswagen T-Cross model stands on a lifting platform in a car tower on the Volkswagen factory premises.
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President Donald Trump’s next trade battle could involve the U.S. slapping steep tariffs on auto imports from Europe — but that wouldn’t really be the White House’s ultimate goal, one expert said Wednesday.
Instead, such a move may well prove to be a “Trojan horse” for a bigger deal on agriculture, according to David Hauner, head of cross-asset strategy and economics for Europe, the Middle East and Africa at Bank of America Merrill Lynch.
Now that Trump has imposed more tariffs on Chinese goods, all eyes are turning to a potentially brewing trade war between the U.S. and Europe. The president had threatened as early as last year that he would slap a 25% tariff on car imports from the European Union. So far, however, the tariffs have not been imposed — but Trump is due to make a decision on European auto imports by May 18.
According to Hauner, however, the White House may have a tough road ahead.
“We think there will at least be an attempt by the U.S. to push for some sort of concessions from Europe. It’s gonna be very difficult particularly if Trump actually starts a discussion about agriculture,” he told CNBC’s “Squawk Box.”
He added: “Some say that car tariffs might … be a Trojan horse to actually start discussions about agriculture, because that’s where really the big business for the U.S. and Europe would be. Agriculture and Europe is politically very very sensitive when it comes to allowing American imports.”
Farmers — a key political constituency for Trump — have seen their fortunes suffering from the trade war with China, and that’s potentially a concern for the president ahead of his 2020 re-election bid.
Since his tariff threat against European autos, Trump has met the president of the European Commission, the EU’s executive body, and both decided to seek an agreement over trade and avoid tariffs. Nearly a year since their meeting, both sides have yet to start those official trade talks.
But analysts have pegged the tariffs on Chinese goods as a sign of what’s to come for Europe. Last Monday, European auto stocks fell more than 3% following Trump’s tariffs announcement over the weekend.
There could still be a deal as long as the U.S. keeps the trade discussions with the European Union to autos only, according to Hauner.
But, he said, “If the discussion will include agriculture, then it gets really, really dicey.”
“Europe is really collateral damage here because Europe has not enough domestic growth. It really depends so much on trade and that is now really its Achilles’ heel,” Hauner added.
According to the Office of the United States Trade Representative, U.S. imports for consumed agricultural products from EU countries totaled $23.9 billion in 2018, while U.S. agricultural goods exports to the EU was $13.5 billion.
Auto imports from EU countries were worth $56.4 billion. Overall, the U.S. goods trade deficit with EU countries was $169.3 billion in 2018, an 11.8% increase over 2017, according to the USTR.
Any U.S. tariffs on European cars would hit Germany’s important automobile industry particularly hard. The United States is Germany’s most important single export destination after the bloc of EU countries.
— Reuters and CNBC’s Yen Nee Lee contributed to this report.
Saudi seeks oil supply protection as U.S and Iran face off
Saudi Arabia called for swift action to secure Gulf energy supplies and joined the United States in blaming Iran for attacks on two oil tankers in a vital shipping route that have raised fears of broader confrontation in the region.
Thursday’s tanker attacks in the Gulf of Oman exacerbated the antagonistic fallout from similar blasts in May that crippled four vessels. Washington, already embroiled in a standoff with Iran over its nuclear programme, has blamed Tehran and Saudi Arabia’s crown prince also accused Iran on Saturday.
Iran has denied any role in the strikes on the tankers south of the Strait of Hormuz, a major transit route for oil from Saudi Arabia, the world’s biggest crude exporter, and other Gulf producers.
Saudi Energy Minister Khalid al-Falih said there must be “a rapid and decisive response to the threat” to energy supplies, market stability and consumer confidence, his ministry said on Twitter.
Saudi Crown Prince Mohammed bin Salman, in an interview with Saudi-owned newspaper Asharq Al-Awsat, blamed Iran and called on the international community to take a “decisive stand” against the attacks.
“The kingdom does not want a war in the region but it will not hesitate to deal with any threats to its people, its sovereignty, or its vital interests,” the crown prince said.
The U.S. military released a video on Thursday that it said showed Iran’s Revolutionary Guards were behind the explosions that damaged the Norwegian-owned Front Altair and the Japanese-owned Kokuka Courageous.
“Iran did do it and you know they did it because you saw the boat,” U.S. President Donald Trump told Fox News on Friday.
The United States has tightened sanctions on Iran since Washington withdrew from a 2015 nuclear pact between Tehran and global powers last year. Washington’s stated aim is to drive Iranian oil exports, the mainstay of its economy, to zero.
Tehran has said that if its oil exports were halted, it could block the Strait of Hormuz, a narrow channel of water separating Iran and Oman through which passes a fifth of the oil consumed globally.
Oil prices have climbed 3.4% since Thursday’s attacks. Ship insurers said insurance costs for ships sailing through the Middle East have jumped by at least 10%.
Saudi Arabia’s energy minister said in Japan at a meeting of energy ministers from the G20 group of nations that the kingdom is committed to ensuring stability of global oil markets.
Japanese Industry Minister Hiroshige Seko said ministers agreed on the need to “work together to deal with the recent incidents from (an) energy security point of view.”
Trump, who pulled the United States out of the nuclear deal under which world powers agreed to ease international sanctions on Iran in return for curbs on Tehran’s nuclear work, said any move to close the Strait of Hormuz would not last long.
He also said he was open to holding talks with Iran, although Tehran said it had no plans to negotiate with the United States unless it reversed a decision on the nuclear deal.
Tehran and Washington have both said they have no interest in a war. But this has done little to assuage concerns that the arch foes could stumble into conflict.
A U.S. official told Reuters a surface-to-air missile was fired from Iranian territory on Thursday morning at a U.S. drone that was near Front Altair following the attack on the tanker. The missile did not hit the drone, the official said.
Acting U.S. Defense Secretary Patrick Shanahan said the United States was “planning various contingencies” when asked if more military forces would be sent to the area, but added that the focus was on building an international consensus.
“We also need to broaden our support for this international situation,” he told reporters on Friday.
CALLS FOR RESTRAINT
As well as blaming Iran for the tanker attacks, Washington has said Tehran was behind May 14 drone strikes on two Saudi oil-pumping stations. Tehran has denied all those charges.
Britain has backed the United States in blaming Iran for the tanker attacks. On Saturday, Iran summoned the British ambassador to complain about its “unacceptable stance,” ISNA news agency reported.
Other nations have urged caution. Germany said the video released by the U.S. military was not enough to prove Iran’s role, while U.N. Secretary-General Antonio Guterres called for an independent investigation to determine responsibility.
China and the European Union called for restraint.
Iranian President Hassan Rouhani renewed Iran’s threat to continue scaling back compliance with the nuclear deal unless other signatories to the pact show “positive signals”.
He did not specify what Iran wanted in his comments to a meeting of Asian leaders in Tajikistan.
France and other European signatories to the nuclear deal have said they wanted to save the accord. But many of their companies have cancelled deals with Tehran, under pressure from the United States.
Crew members of targeted Norwegian-owned tanker now in Dubai
Undated handout archive photo by the Norwegian shipowner Frontline of the crude oil tanker Front Altair, released June 13, 2019.
NTB Scanpix | Reuters
Crew members from a Norwegian-owned oil tanker apparently attacked in the Gulf of Oman landed Saturday in Dubai after two days in Iran as the other tanker targeted in the assault limped into anchorage off the eastern coast of the United Arab Emirates.
Both the mariners’ recollection and the physical evidence remaining on the MT Front Altair and the Kokuka Courageous, now off the coast of Fujairah, will play an important role in determining who the international community blames for Thursday’s explosions on board the oil tankers.
Already, the U.S. has blamed Iran for what it described as an attack with limpet mines on the two tankers, pointing to black-and-white footage it captured that American officials describe as Iranian Revolutionary Guard troops removing an unexploded mine from the Kokuka Courageous.
Tehran rejects the allegation, instead accusing the U.S. under President Donald Trump of pursuing an “Iranophobic” campaign against it. However, Iran previously used mines against oil tankers in 1987 and 1988 in the “Tanker War,” which saw the U.S. Navy escort ships through the region — something American officials may consider doing again.
In a new allegation Saturday, the U.S. military accused Iranian Revolutionary Guard troops of trying but failing to shoot down a U.S. drone to disrupt surveillance of the tankers during the attacks.
All this comes after four other oil tankers off Fujairah suffered similar attacks in recent weeks, and Iranian-allied rebels from Yemen have struck U.S. ally Saudi Arabia with drones and missiles.
Late Saturday, Yemen’s Iranian-backed Houthi rebels claimed a new drone attack targeting Saudi Arabia, the latest in their recent campaign that has stepped up amid the Mideast tensions. Yahia al-Sarie, a Houthi spokesman, said their drones targeted airports in Jizan and Abha in Saudi Arabia. Early Sunday, the Saudi-led coalition fighting in Yemen said it shot down a drone near the Abha regional airport, but did not acknowledge the Jizan claim.
The Houthis say they launched a cruise missile that struck the Abha airport Wednesday, an attack Saudi Arabia says wounded 26 people.
Trump withdrew America last year from the 2015 nuclear deal that Iran reached with world powers and recently imposed a series of sanctions now squeezing its beleaguered economy and cutting deeply into its oil exports. While Iran maintains it has nothing to do with the recent attacks, its leaders repeatedly have threatened to close the vital Strait of Hormuz, through which 20 percent of the world’s oil flows.
On Saturday, Associated Press journalists saw the crew members of Front Altair after their Iran Air flight from Bandar Abbas, Iran, landed at Dubai International Airport. Ten of its 23 mariners walked out to be greeted by officials who earlier could be heard saying the others would be catching connecting flights.
The officials repeatedly refused to identify themselves to journalists. They and the mariners declined to take questions.
The Front Altair caught fire after the attack Thursday, sending a thick cloud of black smoke visible even by satellite from space. A passing ship rescued the mariners, who later were turned over to Iranian officials. Iran took the mariners to Jask, then later Bandar Abbas before putting them on the flight Saturday night. Its crew was comprised of 11 Russians, 11 Filipinos and one Georgian.
The U.S. military released a video it said shows Iran’s Revolutionary Guard removing an unexploded mine from one of the oil tankers targeted near the Strait of Hormuz.
Source: US Military
Meanwhile on Saturday, the Kokuka Courageous arrived off the coast of Fujairah. Journalists in the city could not reach the vessel, as boat captains said authorities instructed them not to go near the stricken vessel.
The Kokuka Courageous is the vessel where Iranian Revolutionary Guard troops were filmed Thursday removing something from the ship’s hull. The U.S. military says they removed an unexploded limpet mine, which can be magnetically attached to a vessel. The implication is that Iran wanted to remove any evidence that could link them to the attack. Weapons experts can examine a mine for clues about its manufacturer.
The black-and-white video shared Friday by the U.S. military’s Central Command came from an MH-60 Seahawk helicopter, said Cmdr. Joshua Frey, a spokesman for the U.S. Navy’s 5th Fleet. Such helicopters carry FLIR cameras. FLIR, or “forward-looking infrared” cameras, which record heat signatures in black and white.
In a statement released Saturday, a spokesman for U.S. Central Command said a U.S. drone had been observing the Front Altair as it was on fire. Several minutes later, Iranian Revolutionary Guard troops fired a modified Iranian SA-7 surface-to-air missile to try to bring down the drone in a likely attempt to disrupt the drone’s surveillance of the Kokuka Courageous, Lt . Col. Earl Brown said. Iran did not immediately acknowledge the incident.
Tensions in the Persian Gulf have risen as Iran appears poised to break the nuclear deal, which Trump withdrew America from last year. In the deal, Tehran agreed to limit its enrichment of uranium in exchange for the lifting of crippling sanctions. Now, Iran is threatening to resume enriching uranium closer to weapons-grade levels if European nations don’t offer it new terms to the deal by July 7.
Already, Iran says it quadrupled its production of low-enriched uranium. Meanwhile, U.S. sanctions have cut off opportunities for Iran to trade its excess uranium and heavy water abroad, putting Tehran on course to violate terms of the nuclear deal regardless.
In May, the U.S. rushed an aircraft carrier strike group and other military assets to the region in response to what it said were threats from Iran.
Regardless of who is responsible, the price of a barrel of benchmark Brent crude spiked as much as 4% immediately after the attack Thursday, showing how critical the region remains to the global economy. The Saudi Energy Ministry quoted Minister Khalid al-Falih on Saturday as saying “a rapid and decisive response” was needed to the recent attacks.
Sheikh Abdullah bin Zayed Al Nahyan, the UAE’s Foreign Minister, also called the May attacks against the four oil tankers off Fujairah as “state-sponsored.” He declined to name who the UAE suspected of carrying out the attacks.
Hong Kong protesters demand top official quit
JUNE 15: Carrie Lam, Hong Kong’s chief executive, speaks during a news conference at Central Government Complex on June 15, 2019 in Hong Kong China.
Anthony Kwan | Getty Images News | Getty Images
Crowds of Hong Kong protesters took to the streets Sunday to demand the city’s top official resign a day after she suspended — but did not withdraw — contentious legislation to allow extraditions to China that opponents say must be scrapped entirely.
Citizens, many dressed in black, packed subway carriages as they made their way to participate in the march beginning in the late afternoon in hot, muggy weather and that followed a similar one last Sunday that drew hundreds of thousands. Crowds also lined up to take ferries across famed Victoria Harbor to join the demonstration.
Immediate estimates were not available but huge throngs similar to the week before were seen packing the main protest route and spilling over into adjacent streets. People held signs including ones demanding Chief Executive Carrie Lam resign and denouncing the extradition proposal and alleged police brutality. “Stop killing us,” read one.
Lam had vowed to press ahead with amendments to Hong Kong law to allow extraditions to places with which it has no such arrangements — including mainland China.
But citing injuries to police and protesters in demonstrations that turned violent Wednesday and what Lam called divisions in society engendered by the plan, she announced Saturday that she was putting the legislation on indefinite hold.
Many in the Asian trade and finance center of 7.4 million people opposed the plan as they fear their legal system and freedoms – legacies of the territory’s history as a British colony – would be compromised by closer judicial ties with China.
Hong Kong was guaranteed a high degree of control over its own affairs for at least 50 years under a “one country, two systems” arrangement when Britain ceded sovereignty to China on July 1, 1997. But local unease over increasing mainland influence has steadily grown since.
Foreign business groups and governments, including the United States, also opposed the extradition plan, stressing concerns that any erosion to Hong Kong’s legal system could make it a less attractive place for banks and companies to operate.
The mood on Sunday was one of anger at Lam but also sorrow after the death of a protester on Saturday after he reportedly fell from the top of a shopping mall where he had unfurled a banner demanding the plan be withdrawn.
Ahead of the protest, hundreds pf people paid their respects at a makeshift memorial set up outside the shopping mall, offering flowers, prayers and incense.
‘Express our voice’
Kelly Wong, who thinks Hong Kong is completely under China’s control, said she felt “angry” at Lam for saying she would listen more to the opinions of citizens but with the aim of eventually passing the bill.
“So I think we should come out and express our voice,” she told CNBC.
Sunday’s demonstration marks a week of anti-government protests that included scenes of violence — especially on Wednesday – that are rare in Hong Kong.
On that day crowds estimated by police at more than 10,000 people surrounded the local legislature to stop debate on the bill.
It was peaceful for most of the day but police later repeatedly fired tear gas and rubber bullets into crowds and some protesters clashed with officers and threw objects at them. Many were angry at the response of law enforcement, though Hong Kong’s police commissioner told reporters that it was appropriate.
Lam had called the scenes an “organized riot,” words that angered many.
“There was no riot,” read a sign carried on Sunday.
The Civil Human Rights Front, the pro-democracy political advocacy group that organized last Sunday’s protest as well as the latest one, called Saturday for the rally to go ahead after Lam’s announcement.
“Postponement is not withdrawal,” the group said on its Facebook page Saturday,.
It said that last Sunday’s protest drew just over a million people, though police put the figure at about 240,000.
— CNBC’s Vivian Kam and Yolande Chee contributed to this report.
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