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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 a blank rate on all goods coming into the US could wreak havoc on European carmakers, with the Germans affected by the crisis the automotive sector is considered particularly vulnerable.
Speaking on the campaign trail in late September, Trump announced his desire to turn Germany’s auto giants into American car companies.
“I want German car companies to become American car companies. I want them to build their plants here,” Trump he 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 has done it ever since announced plans to introduce new tariffs on China, Canada and Mexico in one of his first acts in office. The measures include an additional 10% tariff on all Chinese goods entering the US and a 25% tariff on all goods from Canada and Mexico.
Europe was not mentioned in Trump’s first tariff announcement, but EU policymakers are likely to be concerned 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 its major original equipment manufacturers (OEMs) are it’s already wobbly.
volkswagen, Mercedes-Benz Group i BMW all have issued profit warnings in recent months, citing economic weakness and sluggish demand in China, the largest car market in the world.
Rico Luman, senior economist in the transport and logistics sector at Dutch bank ING, said the German auto sector appears to be highly exposed to Trump’s tariff threats.
Germany is by far Europe’s biggest exporter of cars to the United States, with 23 billion euros ($24.2 billion) worth of exports 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 possible imposition of tariffs on German carmakers, Luman said, would make a bad situation even worse.
“It’s the heart of manufacturing, isn’t it?” Luman told CNBC via video call. “So the automotive industry is linked to the steel industry and the chemical industry, so it’s the whole supply chain that’s 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 promise to turn German car companies into US car companies at face value, they warn that additional US tariffs will intensify the challenges he faces the global automotive industry.
“It was rhetoric during the campaign, but there will be some pressure on imports, whether it’s through a tariff or some other kind of unilateral action,” said Michael Robinet, chief executive of automotive consultancy at S&P Global Mobility. CNBC via video call.
“One area that still worries a lot of economists, myself included, is the fact that we’re still around 4% unemployment in the United States, so trying to generate a lot of additional jobs in the U.S. is going to be problematic,” he added.
Volkswagens are seen in the employee parking lot of the Volkswagen Auto Assembly Plant on March 20, 2024 in Chattanooga, Tennessee.
Elijah Novel | Getty Images News | Getty Images
Aside from Trump’s proposed tariffs on China, Canada and Mexico, the US president-elect has promised to impose a blanket. 10% or 20% taxes on all goods arriving in the country. It is unclear, however, whether this promise will become US policy.
“We are evaluating the tariffs that Trump has proposed,” 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 a free trade agreement between the USA, Canada and Mexico (USMCA). .
However, it is 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 US, producing mainly passenger cars and vans at 12 key locations. “We look forward to a constructive dialogue with the new US administration,” 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 U.S. states, including the world’s largest BMW production facility in Spartanburg, South Carolina.
Shares of Volkswagen and BMW are down about 23% year to date, and Mercedes-Benz Group is down about 13% over the same time period.
“Everybody just has to be ready”
“Trump wants more tariffs, so everyone just needs to be ready,” Julia Poliscanova, senior director of electric mobility vehicles and supply chains at campaign group Transport & Environment, told CNBC.
“I think it’s important that Europe continues its own course, whether it’s on the European Green Deal or the electrification agenda. Trump risks leaving the United States behind in much of this clean technology and vehicles electric, so it’s an opportunity for Europe to actually accelerate at the same time,” said Poliscanova.
“It will be bad news in the short term, for example, for German car manufacturers, but it’s important to understand that this is what the world is. And we just have to do what’s best for Europe and European industrial interests, and this is not slowing down,” he added.
