Republican presidential candidate former US President Donald Trump speaks to attendees during a campaign rally at the Johnny Mercer Theater on September 24, 2024. in Savannah, Georgia.
Brandon Bell | Getty Images
President-elect Donald Trumppromise to enforce a empty tariff on all goods coming into the U.S. could wreak havoc on European automakers, along with German ones stricken by crisis the automotive sector is considered particularly vulnerable.
Speaking on the campaign trail in late September, Trump announced his desire to turn German auto giants into American auto firms.
“I want German car companies to become American car companies. I want them to build their factories here,” Trump said said in Savannah, Georgia. He added that the word tariff was “one of the most beautiful words I’ve ever heard” and “music to my ears”.
Trump ever since announced plans to impose new tariffs on China, Canada and Mexico in one of his first acts in office. The measures consist of an additional 10% tariff on all Chinese products coming into the US and a 25% tariff on all goods coming from Canada and Mexico.
Europe was not mentioned in Trump’s first tariff announcement, but policymakers in the European Union are likely to worry that it is only a matter of time before the president-elect turns his attention to the 27-nation bloc’s auto sector.
For Germany, the prospect of US tariffs on European cars comes at a time when leading original equipment manufacturers, or OEMs, are it’s already winding up.
Volkswagen, Mercedes-Benz Group and BMW have all issued profit warnings in recent months, citing economic weakness and weak demand in China, the largest automotive market in the world.
Rico Luhmann, senior sector economist for transport and logistics at Dutch bank ING, said the German auto sector appears significantly exposed to Trump’s tariff threats.
Germany is Europe’s biggest exporter of passenger cars to the United States, with exports worth 23 billion euros ($24.2 billion) last year, according to data compiled by statistics agency Eurostat and ING Research. This represents 15% of Germany’s total exports to the US
The potential imposition of tariffs on German carmakers, Luhmann said, would therefore make a bad situation even worse.
“It’s the heart of the manufacturing industry, right?” Luhmann told CNBC via video call. “So the auto industry is ultimately tied to the steel industry and the chemical industry, so the whole supply chain is involved here.”
A German government spokesman declined to comment when contacted by CNBC.
Volkswagen, BMW and Mercedes-Benz
While some analysts have chosen not to take Trump’s pledge to turn German auto firms into US car companies at face value, they warn that additional US tariffs will increase challenges for the global auto industry.
“This was rhetoric on the campaign trail, but there will be some pressure on imports, whether it’s through a tariff or some other unilateral action,” Michael Robinette, executive director of automotive consulting at S&P Global Mobility, told CNBC via video call .
“One area that is still troubling to many economists, myself included, is the fact that we’re still hovering around 4% unemployment in the United States, so trying to stimulate a lot of additional work in the U.S. is going to be problematic,” he added.
Volkswagens are seen in the employee parking lot at the Volkswagen car assembly plant on March 20, 2024. in Chattanooga, Tennessee.
Ilia Nuvelage | Getty Images News | Getty Images
Apart from Trump’s proposed tariffs on China, Canada and Mexico, the US president-elect has promised to impose general ones 10% or 20% duty on all goods entering the country. It remains unclear, however, whether this pledge will become US policy.
“We appreciate the tariffs proposed by Trump,” a Volkswagen spokesman told CNBC via email.
The Wolfsburg-based company said more than 90 percent of the vehicles it currently sells in the U.S. market are produced in North America and meet the criteria for duty-free treatment under the US-Canada-Mexico Free Trade Agreement (USMCA). .
However, it is a thought that Trump’s proposed tariffs on Canada and Mexico would end the USMCA.
Meanwhile, Mercedes-Benz said it employs more than 11,000 people in the U.S., producing mostly passenger cars and vans at 12 key locations. “We look forward to a constructive dialogue with the new administration in the US,” a spokesperson told CNBC.
BMW, which declined to comment on the prospect of Trump’s tariff threats, has a nationwide footprint of roughly 30 locations in 12 US states, including BMW’s largest single production facility in the world in Spartanburg, South Carolina.
Shares of Volkswagen and BMW have fallen about 23% year to date, with Mercedes-Benz Group down roughly 13% over the same time period.
“Everybody just needs to be ready”
“Trump wants more tariffs, so everybody just needs to be ready,” Julia Poliskanova, senior director for vehicles and e-mobility supply chains at the Transport & Environment campaign, told CNBC via video call.
“I think it’s just important for Europe to pursue its own course, whether it’s on the European Green Deal or the electrification agenda. Trump risks falling behind America on a lot of these clean technologies and electric cars, so this is an opportunity for Europe to actually accelerate at the same time,” Poliskanova said.
“It will be bad news in the short term, for example for the German car manufacturers, but it is important to understand that this is the world. And we just have to do what’s best for Europe and European industrial interests – and that’s not slowing down,” she added.
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2024-12-18 11:01:51