Donald Trump has threatened to "simply apply a TAX" on cars made in Europe if the European Union retaliates against trade heavy penalties he is seeking on imports of steel and aluminium.
The EU is promising retaliation against American exports if the president follows through on his idea of a 25% tariff on imported steel and 10% on aluminium - as he says he will next week.
The EU is mulling a 25% tariffs on around $3.5bn of imports from the US, including iconic American brands such as Levi's jeans and Harley-Davidson motorbikes.
Trump responded on Twitter: "If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!"
He also railed against "very stupid" trade deals by earlier administrations and said other countries "laugh at what fools our leaders have been. No more!"
The US accounts for around 25% of European Union's total car export market, with Germany making roughly half the vehicles the bloc exported in 2016. However, European car makers also have factories in the US, employing thousands of American workers who would also be vulnerable in a trade war.