February 22, 2019

Europe Retaliates Against Trump Tariffs

“Fewer than expected S.U.V. sales and higher than expected costs — not completely passed on to the customers — must be assumed because of increased import tariffs for U.S. vehicles into the Chinese market,” Daimler said in a statement late Wednesday.

Last year, BMW exported about 80,000 vehicles to China, including its X5 S.U.V., from the Spartanburg plant, its largest factory in the world. BMW said in a statement on Thursday that it did not need to revise its outlook for profit because of trade tensions, but the company added that it “continues to observe international developments closely.”

Shares of major German and American carmakers fell sharply Thursday on worries of a trade-related slowdown. Daimler shares closed off more than 4 percent in Frankfurt trading, and BMW shares slipped 3 percent.

If the trade conflict continues, companies could consider relocating assembly lines to other countries, leading to job losses in the United States. BMW already has factories in South Africa and China, among other countries.

Carmakers would not make such a decision lightly. Moving manufacturing is expensive and takes years to carry out. The German carmakers continue to hope that the conflict will blow over and perhaps even provide a catalyst for removing trade barriers with the United States.

Currently the United States charges a 2.5 percent levy on imported foreign cars while Europe imposes a tariff of 10 percent on cars from the United States. German automakers would be happy if tariffs fell to zero in both directions, though only as part of a broad trade pact, Eckehart Rotter, a spokesman for the German Association of the Automotive Industry, said Thursday.

Ironically, the tariffs could have a small — if somewhat short-lived — upside for Europe. Local steel and aluminum may eventually fall in price because producers in countries like Russia or Japan will divert supplies that otherwise would have gone to the United States, creating a glut in the market. That would be bad for steel producers but good for machinery makers and other companies that use a lot of steel, potentially giving them an edge over their American competitors in overseas markets.

Article source: https://www.nytimes.com/2018/06/21/business/economy/europe-tariffs-trump-trade.html?partner=rss&emc=rss

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