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Trump goes after German auto imports

June 13, 2018 0 Comments


U.S. President Donald Trump had an ill-tempered weekend summit, and followed it up by accusing various U.S. allies of “unfair treatment over trade.”

His latest target? German auto imports.

“[The European Union doesn’t] take a lot of what we have, and yet they send Mercedes in to us, they send BMWs in to us, by the millions,” Trump said. “It’s very unfair, and it’s very unfair to our workers and I’m going to straighten it out.”

In a recent meeting in Washington, Trump told French President Emmanuel Macron that there were too many German cars in the U.S. It wasn’t the first time he raised the issue, taking it up with German Chancellor Angela Merkel previously and threatening to tax auto imports at 35 percent.

Key economists say Trump is missing two key points on the matter: German automakers have large factories in the U.S., reducing the need to import their vehicles, and targeting them will hurt both U.S. workers and the economy.

In 2017, German automakers sold 1.35 million vehicles, making up about 8 percent of U.S. auto sales. Only 494,000 of those vehicles were exported from Germany – 25 percent less than 2013, according to the German carmakers association. Much of the rest were made in the U.S. and Mexico, which has a free trade agreement with the U.S.

It’s not unusual; General Motors and Ford make cars in Mexico as well, delivering them across the border into the U.S. To keep automakers from building vehicles in Mexico, Trump would have to pull out of NAFTA.

BMW, Volkswagen, and Daimler-owned Mercedes all have major manufacturing plants in the U.S., employing nearly 50,000 American workers: Volkswagen has a large factory in Chattanooga, TN, producing 112,000 vehicles last year; Mercedes has a plant in Tuscaloosa County, AL, cranking out 300,000 cars and SUVs a year. BMW’s largest plant in the world is located in Spartanburg, South Carolina, and hit a production record of over 400,000 vehicles in 2017. 70 percent of its output was exported to other countries.

Business is thriving; the total number of cars produced by German automakers in the U.S. is up to 804,000, an increase of 180,000 since 2013, according to the German carmakers association. Half of its volume is exported to other markets, including Europe and Asia.

Vehicles from Europe are subjected to a 2.5 percent U.S. when exported to the U.S., while vehicles built in the U.S. face a 10 percent tariff when exported to the E.U. Europe was willing to lower tariffs on automobiles during negotiations with the U.S. over the steel and aluminum tariffs, but the Trump administration walked away.

If their products are targeted with increased tariffs, German automakers will likely scale back their investment in the U.S., and the EU would raise tariffs on U.S. automobiles in response.

The focus on tariffs, is “misplaced,” according to economists. New trade barriers would mark major problems for the industry as a whole, which relies on parts and supply chains spanning several countries.

“To make a clear cut distinction between what is an American car and what is a German car is in my opinion nonsense,” Jacob Kirkegaard, European trade expert with Peterson Institute for International Economics, told CNNMoney.

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