A 25 percent import duty might force German carmakers out of America.
The fact that President Trump wants to protect America's manufacturing and industry in general is nothing new and some would say commendable, but this latest announcement hasn't gone down well in Europe. According to Reuters, Trump told French President Emmanuel Macron in April that he intends to push out German automakers from the US altogether. Both the US embassy in Berlin and Macron's office in Paris declined to comment on the report. However, today's announcement that 25% tariffs on steel and 10% on aluminum will begin from midnight will surely draw a response.
The tariffs apply to imports from the European Union, Mexico and Canada.Automakers like BMW, Mercedes-Benz and Volkswagen will be quite nervous at the moment. This news follows last week's decision by the Trump administration to open a trade investigation into imported vehicles, which could potentially impose a 25 % tariff on those cars. Why? The same "national security" grounds used to impose duties on imported metals in March. German automakers also just so happen to control some 90 percent of the US premium car market. They're also the biggest European Union exporters to the US. This isn't the first time Trump has criticized imported German cars.
He previously claimed the business relationship between the US and Germany was an "unfair one-way street." At the time he said a 35% import duty should happen. The new tariffs will hit automakers' production facilities in the US, such as BMW's massive plant in Spartanburg, South Carolina, hard. The United States also accounts for some 30 percent of these German automakers' global sales, so the tariffs will really hurt their bottom line and could well destroy the business case for German car exports to the US. It didn't take long for those affected by Trump's decision to comment.
"Today's decision to proceed with imposing tariffs on Canada, Mexico, and the EU means American consumers will continue to bear the brunt of a trade war with our key economic partners," said American International Automobile Dealers Association (AIADA) President and CEO Cody Lusk. "The decision to forge ahead with these steel and aluminum tariffs will adversely impact the price of consumer goods, including the millions of new vehicles Americans buy each year." The EU has already begun discussing retaliatory measures on Harley-Davidson motorcycles and bourbon imported from the US, but nothing has been finalized as of this writing. One thing's for certain: this trade battle is not over yet.