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.
According to the Wolfsburg-based company, over 90% of the cars it presently sells in the US market are made in North America and satisfy the requirements for duty-free treatment under the USMCA, a free trade deal between the US, Canada, and Mexico.
However, it is believed that the USMCA will be terminated as a result of Trump’s proposed tariffs on Canada and Mexico.
In contrast, Mercedes-Benz reported that it has over 11,000 employees in the United States and produces primarily passenger cars and vans at 12 strategic sites. A spokeswoman told CNBC, “We look forward to a constructive dialogue with the new administration in the U.S.”
BMW has over 30 locations across 12 U.S. states, including the largest BMW production facility in the world in Spartanburg, South Carolina. The company declined to comment on the possibility of Trump’s tariff threats.
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’
Julia Poliscanova, senior director for automobiles and e-mobility supply chains at the campaign group Transport & Environment, told CNBC via video chat that if Trump wants more tariffs, everyone should be prepared.
Whether it’s the electrification agenda or the European Green Deal, I believe it is crucial that Europe stays on its own path. According to Poliscanova, Europe has a chance to advance simultaneously since Trump runs the risk of lagging behind America in several areas, including clean technology and electric vehicles.
For instance, German automakers will be negatively impacted in the near future, but it’s critical to recognize that this is the reality of the world. She went on to say that we simply must not slow down in order to serve the interests of European industry and Europe.
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