Republican Presidential candidate, former U.S. President Donald Trump speaks to attendees throughout a marketing campaign rally on the Johnny Mercer Theatre on September 24, 2024 in Savannah, Georgia.
Brandon Bell | Getty Images
President-elect Donald Trump’s pledge to impose a blanket tariff on all items coming into the U.S. may wreak havoc for European carmakers, with Germany’s crisis-stricken automotive sector considered significantly weak.
Speaking on the marketing campaign path in late September, Trump introduced his want to show Germany’s auto giants into American automotive corporations.
“I would like German automotive corporations to change into American automotive corporations. I would like them to construct their vegetation right here,” Trump said in Savannah, Georgia. He added that the phrase tariff was “one of the stunning phrases I’ve ever heard” and “music to my ears.”
Trump has since announced plans to introduce new tariffs on China, Canada and Mexico in considered one of his first acts in workplace. The measures embody a further 10% tariff on all Chinese merchandise coming into the U.S. and a 25% tariff on all items coming from Canada and Mexico.
Europe wasn’t talked about in Trump’s first tariff announcement however EU policymakers will possible be nervous that it is only a matter of time earlier than the president-elect turns his consideration to the 27-nation bloc’s auto sector.
For Germany, the prospect of U.S. tariffs on European autos comes at a time when it is prime authentic gear producers (OEMs) are already reeling.
Volkswagen, Mercedes-Benz Group and BMW have all issued revenue warnings in latest months, citing financial weak spot and sluggish demand in China, the world’s largest car market.
Rico Luman, senior sector economist for transport and logistics at Dutch financial institution ING, stated Germany’s auto sector seems to be considerably uncovered to Trump’s tariff threats.
Germany is by far Europe’s largest exporter of passenger automobiles to the U.S., accounting for 23 billion euros ($24.2 billion) price of exports final yr, in keeping with information compiled by statistics company Eurostat and ING Research. That represents 15% of Germany’s complete exports to the U.S.
The potential imposition of tariffs on Germany’s carmakers, Luman stated, would due to this fact make a foul state of affairs even worse.
“It is the guts of the manufacturing business, proper?” Luman instructed CNBC by way of video name. “So, the automotive business is linked finally to the metal business and the chemical business, so it’s the complete provide chain that is concerned right here.”
A German authorities spokesperson declined to remark when contacted by CNBC.
Volkswagen, BMW and Mercedes-Benz
While some analysts have chosen to not take Trump’s pledge to show German automotive corporations into U.S. automotive corporations at face worth, they warn that extra U.S. tariffs will intensify the challenges going through the worldwide auto business.
“It was rhetoric on the marketing campaign path however there’s going to be some strain on imports, whether or not that might be by a tariff, or some kind of different unilateral motion,” Michael Robinet, govt director of automotive consulting at S&P Global Mobility, instructed CNBC by way of video name.
“One space that’s nonetheless regarding for lots of economists, together with myself, is the truth that we’re nonetheless hovering round mainly 4% unemployment within the United States, so making an attempt to drive numerous extra work within the U.S. goes to be problematic,” he added.
Volkswagens are seen within the worker car parking zone on the Volkswagen vehicle meeting plant on March 20, 2024 in Chattanooga, Tennessee.
Elijah Nouvelage | Getty Images News | Getty Images
Separate to Trump’s proposed tariffs on China, Canada and Mexico, the U.S. president-elect has vowed to impose a blanket 10% or 20% responsibility on all items coming into the nation. It stays unclear, nevertheless, whether or not this pledge will change into U.S. coverage.
“We are evaluating the tariffs Trump has proposed,” a spokesperson for Volkswagen instructed CNBC by way of electronic mail.
The Wolfsburg-headquartered firm stated that over 90% of the autos it at the moment sells within the U.S. market are produced in North America they usually meet the standards for duty-free therapy beneath a free commerce settlement between the U.S., Canada and Mexico (USMCA).
Nonetheless, it’s thought that Trump’s proposed tariffs on Canada and Mexico would carry an finish to the USMCA.
Mercedes Benz, in the meantime, stated it employs greater than 11,000 folks within the U.S., producing primarily passenger automobiles and vans throughout 12 key places. “We look ahead to a constructive dialogue with the brand new administration within the U.S.,” a spokesperson instructed CNBC.
BMW, which declined to touch upon the prospect of Trump’s tariff threats, has a nationwide footprint of roughly 30 places throughout 12 U.S. states, together with the biggest single BMW manufacturing facility on the earth in Spartanburg, South Carolina.
Shares of Volkswagen and BMW have each fallen round 23% year-to-date, with Mercedes-Benz Group down roughly 13% over the identical timeframe.
‘Everyone simply must be prepared’
“Trump desires extra tariffs, so everybody simply must be prepared,” Julia Poliscanova, senior director for autos and e-mobility provide chains on the marketing campaign group Transport & Environment, instructed CNBC by way of video name.
“I believe it’s simply necessary for Europe to proceed its personal course, be it on the European Green Deal or on the electrification agenda. Trump dangers placing America behind on numerous this clear tech and EVs, so it is a chance for Europe really to speed up on the identical time,” Poliscanova stated.
“It can be dangerous information within the quick time period, for instance, for German carmakers, however it is very important perceive that that is what the world is. And we simply have to do what’s finest for Europe and European industrial pursuits — and that isn’t slowing down,” she added.
