The president-electEuropean automakers could suffer greatly from Donald Trump’s promise to put a blanket tariff on all goods entering the United States, with Germany’s already troubled automobile industry believed to be especially vulnerable.
Trump declared his intention to convert Germany’s auto giants into American auto companies while campaigning in late September.
German automakers should become American automakers, in my opinion. Trumpsaidin Savannah, Georgia is where I want them to establish their plants. He went on to say that tariff was one of the most exquisite things I had ever heard, and it sounded like music to me.
In one of his first actions as president, Trump has subsequently declared his intention to impose fresh tariffs on Canada, Mexico, and China. The measures include a 25% tariff on all commodities arriving from Canada and Mexico and an additional 10% tariff on all Chinese goods entering the United States.
Although Trump’s initial tax declaration made no mention of Europe, European Union authorities will probably be concerned that the president-elect will soon switch his focus to the auto industry in the 27-nation union.
Germany’s leading original equipment manufacturers, or OEMs, are already in a bind as a result of the possibility of U.S. tariffs on European automobiles.
In recent months, Volkswagen, Mercedes-Benz Group, and BMW have all warned about their profits, pointing to bad economic conditions and slow demand in China, the largest automobile market in the world.
Germany’s auto industry seems to be particularly vulnerable to Trump’s tariff threats, according to Rico Luman, senior sector economist for transport and logistics at Dutch bank ING.
According to data gathered by statistics agency Eurostat and ING Research, Germany is by far the biggest supplier of passenger automobiles to the United States, with 23 billion euros ($24.2 billion) in exports last year. That amounts to 15% of all of Germany’s exports to the United States.
According to Luman, the possibility of imposing tariffs on German automakers would exacerbate an already dire situation.
Isn’t it the center of the manufacturing sector? Luman said via a video chat to CNBC. Thus, the entire supply chain is engaged because the automotive industry is eventually connected to the steel and chemical industries.
When CNBC called a German government representative, the official declined to comment.
Volkswagen, BMW and Mercedes-Benz
Some analysts caution that more U.S. tariffs will make the problems facing the global auto sector worse, even though they have decided not to take Trump’s promise to convert German automakers into American automakers at face value.
Michael Robinet, executive director of automotive consulting at S&P Global Mobility, told CNBC via video call that there will be some pressure on imports, whether it be through a tax or some other unilateral action. This was language on the campaign trail.
The fact that the unemployment rate in the United States is still at about 4% is one area that many economists, including myself, are still concerned about. As a result, he said, it will be difficult to generate a lot of new jobs in the country.
The president-elect of the United States has pledged to impose a general 10% or 20% levy on all goods entering the US, in addition to Trump’s proposed tariffs on China, Canada, and Mexico. However, whether this commitment will become U.S. policy is still up in the air.
We are reviewing the tariffs that Trump has suggested, a Volkswagen representative emailed CNBC.
The Wolfsburg-headquartered company said that more than 90% of the vehicles it currently sells in the U.S. market are produced in North America and they meet the criteria for duty-free treatment under a free trade agreement between the U.S., Canada and Mexico (the USMCA).
Nonetheless, it isthoughtthat Trump s proposed tariffs on Canada and Mexico would bring an end to the USMCA.
Mercedes-Benz, meanwhile, said it employs more than 11,000 people in the U.S., producing mainly passenger cars and vans across 12 key locations. A spokeswoman told CNBC, “We look forward to a constructive dialogue with the new administration in the U.S.”
BMW, which declined to comment on the prospect of Trump s tariff threats, has a nationwide footprint of roughly 30 locations across 12 U.S. states, including the largest single BMW production facility in the world in Spartanburg, South Carolina.
Mercedes-Benz Group’s stock has dropped almost 13% in the same period, while shares of Volkswagen and BMW have both dropped over 23% so far this year.
‘Everyone just needs to be ready’
Trump wants more tariffs, so everyone just needs to be ready, Julia Poliscanova, senior director for vehicles and e-mobility supply chains at the campaign group Transport & Environment, told CNBC via video call.
I think it is just important for Europe to continue its own course, be it on the European Green Deal or on the electrification agenda. Trump risks putting America behind on a lot of this clean tech and EVs, so it is an opportunity for Europe actually to accelerate at the same time, Poliscanova said.
It will be bad news in the short term, for example, for German carmakers, but it is important to understand that this is what the world is. And we just need to do what is best for Europe and European industrial interests and that is not slowing down, she added.
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