The trade war is starting to take casualties.
US President Donald Trump has made his stance on China very clear after announcing a 25% tariff on vehicles and parts built in the People's Republic. The move has already delayed several Chinese automakers from entering the US market and is even having a major impact on European and American automakers as well.
Both Volvo and General Motors build vehicles in China and asked President Trump to issue exemptions for the Chinese-built XC60 and Buick Envision SUVs. Both automakers have been awaiting a response since 2018 and according to Reuters, Trump has finally made his decision.
The Trump administration has denied exemptions for both the Buick Envision and the Volvo XC60 in a letter from the US Trade Representative’s office that mentions "a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” GM says it has been paying the 25% tariff on the Envision since July 2018 and has not raised prices of the SUV to make up for lost revenue.
Envision sales dropped from around 41,000 units in 2017 to just 30,000 units in 2018, and sales have been continuing to decline so far in 2019. GM says even though only a small number of cars are built in China and sold in the US, the funds from those sales would be used "to invest in our US manufacturing facilities and to develop the next generation of automotive technology in the United States.” And because the Envision is a low-volume product, "assembly in our home market is not an option."
Volvo is in a similar pinch but has moved some XC60 production back to Europe in order to avoid paying tariffs. The Swedish automaker may have even more cause for concern than Buick because the XC60 is the company's best-selling model in the US. Sales for the XC60 don't seem to be impacted heavily in the US, but the trade tensions with China are having an impact on Volvo's profits.