The European Commission reportedly sent a letter to the U.S. threatening to hit $US300 billion of American goods with tariffs.
Trump's threat was the latest salvo in an escalating trade war that saw the EU slap duties on US-made jeans and Harley Davidson motorcycles in a tit-for-tat response to U.S. tariffs on European steel and aluminium exports.
The European Union has claimed that Donald Trump's plans to impose higher import taxes on cars to the United States would harm his own country's economy.
The submission said that tariffs on cars and vehicle parts could undermine U.S. auto production by imposing higher costs on United States manufacturers.
"It's awful what they do to us", Trump said in an interview with Fox News.
The EU said the US auto industry is in good health, but any restrictive duties could undermine that trend.
German automaker BMW has now offered its opinion on the domino effect that newly imposed USA tariffs have brought to the auto industry.More news: Spurs and Lakers believe Kawhi Leonard trade clinches LeBron to LA
"The FTSE 100 was down 1.2pc at 7548 points and the Eurozone-wide Stoxx 50 fell 1.4pc after US President Donald Trump suggested on Saturday that the European Union was possibly as bad as China, only smaller", when it comes to trade. They don't want our farm products. The European Union has also agreed to implement retaliation tariffs, already going tit-for-tat by imposing its own 25 percent tariff on $3.2 billion in Americanized goods that include motorcycles, peanut butter, whiskey, and tobacco. "But we don't protect ours and they protect theirs". Now in all fairness they have their farmers.
"The threat of steep tariffs on vehicle and auto component imports risks undermining GM's competitiveness against foreign auto producers by erecting broad brush trade barriers that increase our global costs, remove a key means of competing with manufacturers in lower - wage countries, and promote a trade environment in which we could be retaliated against in other markets".
USA stocks closed higher Monday after a last-minute market rally erased the losses from a daylong slump.
Additionally, the German manufacturer said that there is no correlation between US national security and the domestic manufacture of automobiles.
The commission said "up to $294bn (£223bn) of U.S. exports. could be subject to countermeasures" that would be considered by the European Union and other trading partners, which amounts to nearly a fifth of the total value of United States exports in 2017.
The EU's retaliatory action came after the Trump's administration hit Europe, Canada and Mexico with tariffs on aluminum and steel on June 1.