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Volvo Wants Chinese-Built XC60 Exemption From US Tariffs

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Will the Trump administration agree to this?

Like all automakers, Volvo's crossover lineup is vital to its continued sales success, especially in the US. But unlike some of its competitors, Volvo's XC60 is not built in the US, but rather in China and Sweden. And that now poses a problem. Reuters reports that Volvo has asked the Trump administration for an exemption from new 25 percent tariffs specifically for the XC60, which totaled nearly a third of its US sales last month.

"The imposition of the additional 25 percent duty on mid-size SUVs would cause severe economic harm," Volvo said in a letter last month to the US Trade Representative's office. "The burden of the 25 percent duty imposed on vehicles imported from China will also be borne by American consumers."

Remember, Volvo's parent company is Chinese-owned Geely, so there is a political sensitivity here. Originally, the XC60 was built in Sweden and only more recently added the Chinese production line in order to satisfy growing demand. Apparently, since last March only XC60s built in China have been imported to the US.

Looking ahead a few years, Volvo's newly opened production plant in Charleston, South Carolina could perhaps handle XC60 production, but right now it's only handling the new S60 sedan. In fact, Volvo even told the USTR that "over time given our global manufacturing footprint we could also anticipate production of the XC60s in the US as well."

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Volvo's request is also not without precedent. Specifically, GM asked the Trump administration last July for a tariff exemption for its Chinese-built Buick Envision crossover. However, GM suggested in its request a cap of 40,000 vehicles while Volvo asked the government for no cap. For now, the USTR has not ruled on either request. We don't have any idea as to when an answer will come, but this is certainly a more vital issue for Volvo than GM, which has a much larger vehicle lineup and can far more easily handle the situation.