revving up the engine on a possible trade war between the US and Europe, live from the UK.

This is the Marketplace Morning Report from the BBC World Service. I'm Stuart Clarkson in Fort Leanna Byrne today.

So now the European Union is in the frame for President Trump. The European Commission says it'll react firmly and immediately against unjustified barriers to free and fair trade

after Mr Trump threatened a 25% tariff on all goods from the continent. He says there's a

massive deficit, but Europe argues the gap is much smaller when goods and services are taken

into account. The carmaking sector was singled out by Trump. We've got Matthias Schmidt with us,

who's a European auto's market analyst. Good morning, Matthias. Hi, thanks for having me.

So how big an issue could this be for carmakers in Europe if these tariffs are brought in at 25%?

You could almost say it's a perfect storm brewing. European manufacturers were extremely exposed to

China. China's switching its

purchasing patterns so it's becoming more patriotic. Chinese consumers are purchasing Chinese

brands at a record pace. And European OEMs, the manufacturers, were hoping to kind of use the US to

de-risk from China. Precisely at this time, the Trump administration

are looking to increase the barriers to entry to the US market. I guess if the EU reciprocates,

puts its tariffs up to the same level as the US is going to charge, the impact on the US

isn't as a bigger deal. What's likely to happen is there's likely to be a call to go precisely in the opposite direction.

So at the moment, the trading field is asymmetric.

So importing a vehicle from the US to Europe, 10% tariffs have charged.

And to go the other way, it's 2.5% tariffs.

And there's an increased call from European CEOs from

car manufacturers to, in fact, lower tariffs. So it would be 2.5% each way, rather than going

up to 25%, which would torpedo the European manufacturers' ambitions going forward.

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