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German auto giants prepare for Trump’s tariff threat


Republican Presidential candidate former U.S. 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 Trump’s pledge to impose sanctions general price schedule for all the goods entering the US could devastate European automakers, including Germany. in crisis The auto industry is said to be particularly vulnerable.

Speaking during the election campaign in late September, Trump announced his desire to turn the German auto giant into an American car company.

“I want German auto companies to become American auto companies. I want them to build factories here,” Trump speak in Savannah, Georgia. He added that the word tariff was “one of the best words I have ever heard” and was “music to my ears”.

Trump has since announced plans to introduce new tariffs on China, Canada and Mexico in one of his first acts in office. These measures include an additional 10% tariff on all Chinese products entering 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 EU policymakers will likely be worried that the president-elect’s shift of attention to the 27-nation bloc’s auto sector is only is a matter of time.

For Germany, the possibility of the US imposing tariffs on European cars comes at a time when the country’s leading original equipment manufacturers (OEMs) are struggling. already spinning.

Volkswagen, Mercedes-Benz Group And BMW have all issued profit warnings in recent months, citing economic weakness and sluggish demand in China, largest auto market in the world.

Rico Luman, senior transport and logistics economist at Dutch bank ING, said Germany’s auto industry appeared to be significantly affected by Trump’s tariff threats.

According to data compiled by the statistics agency Eurostat and ING Research, Germany is by far the largest European exporter of passenger cars to the US, accounting for a total export turnover of 23 billion euros ($24.2 billion). last year. This figure accounts for 15% of Germany’s total export turnover to the US

Luman said the possibility of imposing tariffs on German automakers would make the situation worse.

“That’s the heart of manufacturing, right?” Luman told CNBC via video call. “So the auto industry is ultimately linked to the steel industry and the chemical industry, so the whole supply chain is involved here.”

A German government spokesperson declined to comment when contacted by CNBC.

Volkswagen, BMW and Mercedes-Benz

While some analysts chose not to take Trump’s pledge to turn German auto companies into American auto companies at face value, they warned that additional US tariffs would add to those losses. challenges facing the global auto industry.

“It’s been campaign rhetoric but there will be some pressure on imports, whether it’s through tariffs,” said Michael Robinet, managing director of auto consulting at S&P Global Mobility. or some other unilateral action”. CNBC via video call.

“One area that still worries many economists, myself included, is the fact that we are still hovering around a 4% baseline unemployment level in the United States, so trying to create more more jobs in the United States will lead to problems,” he added.

Volkswagen cars are seen in the employee parking lot at the Volkswagen auto assembly plant on March 20, 2024 in Chattanooga, Tennessee.

Elijah Novel | Getty Images News | Getty Images

Different from Trump’s proposed tariffs on China, Canada and Mexico, the US president-elect has announced he will impose a series of tariffs. 10% or 20% taxes on all goods imported into the country. However, it remains unclear whether this commitment will become US policy.

“We are evaluating Trump’s proposed tariffs,” a Volkswagen spokesperson told CNBC via email.

The Wolfsburg-based company said more than 90% of the vehicles currently sold in the US market are manufactured in North America and meet the criteria for tax exemption under the free trade agreement between the US, Canada and Mexico ( USMCA).

Still, it is think that Trump’s proposed tariffs on Canada and Mexico would end USMCA.

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Meanwhile, Mercedes Benz said it employs more than 11,000 people in the US, mainly producing passenger cars and trucks 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 Trump’s potential tariff threat, has about 30 locations nationwide across 12 US states, including the world’s largest BMW manufacturing facility in Spartanburg, South Carolina.

Shares of Volkswagen and BMW are both down about 23% year to date, with Mercedes-Benz Group down about 13% in the same time frame.

‘Everyone just needs to be ready’

“Trump wants more taxes, so everyone just needs to be ready,” Julia Poliscanova, senior director of vehicle supply chain and e-mobility at the advocacy group Transportation & Environment, told CNBC via video call. ready”.

“I think it’s important for Europe to continue on its own path, be it in the European Green Deal or the electrification agenda. Trump risks leaving the US behind in this area.” clean technology and electric vehicles, so this is an opportunity for Europe.” really to accelerate at the same time,” Poliscanova said.

“This will be bad news for German car manufacturers, for example, but it is important to understand that this is the world. And we just need to do what’s best for Europe and Europe’s industrial interests – and that’s without slowing down,” she added.

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