BMW and Mercedes to benefit from US/EU slashed tariffs

Interesting, News | July 9th, 2018 by 17
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Tensions have been high these past few months. With US President Donald Trump threatening the EU, and Germany especially, with trade tariff increases for cars, …

Tensions have been high these past few months. With US President Donald Trump threatening the EU, and Germany especially, with trade tariff increases for cars, many German car companies, and US companies as well, have been on edge. Not only would tariff increases hurt relationships between the US and its European allies but it would also hurt the US customer, who’s the one that would be paying the extra trade cost. And in retaliation, the EU would increase tariffs on the US, as it’s within its right to, according to WTO (World Trade Orginization) rules, which would hurt the US economy. No one wants a trade war, not the US, not the EU, not the car companies.

What’s fascinating is the immense support for these tariffs by Trump voters, though, as they are the ones that stand to hurt most from them. Several European automakers built cars in the United States, in States such as South Carolina (BMW, Volvo), Alabama (Mercedes-Benz) and Tennessee (Volkswagen). All of which are red states, who predominantly voted for Trump, and all of which would be tragically effected by a trade war. Not only could jobs be lost directly, due to European manufactures having to cut jobs, but supply chain jobs all across the country could be lost indirectly as well.

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In fact, the US economy would lose an estimated $14-billion if the US imposes a 20-percent trade tariff on European automobiles, as Trump is threatening to. However, the bigger hit would be if the EU decided to retaliate, which as previously mentioned  would be well within reason, the hit to the US economy could reach as high as $300-billion.

Which is why the idea of completely slashing trade tariffs on automobiles for both sides has been floated out. The bilateral cut of trade tariffs on automobiles between the US and the EU would greatly help European automakers, as it’s mostly German brands that make up the shipment of cars across the Atlantic. Such an idea has even sent shares of BMW and Mercedes-Benz skyrocketing because of it.

Now, Donald Trump’s reasoning for taxing the EU on automobiles is the fact that he thinks we import to many European cars and we don’t export enough US-made cars to the EU. And he thinks the reason for that is the fact that US cars being sent to Europe have a higher tax than cars being imported from Europe to the US. However, that’s not the reason why. The reasons why are many, including the fact that we don’t make a lot of cars that work well in European markets. Our best sellers, and the sorts of cars American brands make here most, are pickup trucks and SUVs, cars that don’t sell well in the EU. In fact, the most exported American-made cars to Europe are German, such as BMW X models and the Mercedes-Benz GLE-Class. The biggest selling American-brand car in Europe has been the Tesla Model S.

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Plus, GM and Ford have their own EU offshoots and factories in Europe where they build and sell cars. So the slashing of tariffs isn’t going to all of a sudden send hundreds of thousands of American-made cars to Europe. If anything, it’s just going to allow the Germans, Brits and Swedes to sell even more cars here. Which, honestly, benefits the US customers, as EU imports could become cheaper, and European brands. But not American brands too much or the US government, who would lose out on a ton of import tariff money that it’s already making.

And if Trump wants to stand his ground on higher EU taxes, it will also hurt American brands that build cars in the EU and bring them here. For instance, Fiat/Chrysler was the brand with the highest sold European-built/American-bought car last year, the Jeep Renegade. Also on that list, the Ford Transit van.

We’re sure German brands will love the idea of completely slashing tariffs both ways, as they export far more vehicles to the US than the inverse. Customers will like it, too. We’re not sure how this is all going to work out, though, as there seems to be a lot of tension across the board. Hopefully, it will all get resolved quickly, with all parties treated fairly.

[Source: Bloomberg/NYT]

17 responses to “BMW and Mercedes to benefit from US/EU slashed tariffs”

  1. Lucky13 says:

    Well you certainly contradicted yourself, you said Europeans don’t like or drive SUV’s then you say the number one imported product is BMW X series? Liberals trying to make points sometimes doesn’t work.

    • Not all SUVs are created equal, though. America doesn’t make a lot of X5 competitors. Want to try driving a suburban through Paris or Munich? Probably wouldn’t be much fun. Or would you want to drive a massive 6.2liter V8 in a city that heavily taxes gas guzzlers? What’s our most manufactured vehicle here in the US? F150 pickup. Think that’ll do well in London? Point is, America doesn’t make a ton of vehicles the world needs. Europe wants small, efficient cars. We don’t make a lot of those and the ones we do we can make in Europe, like Vauxhalls and Opels. That’s why we don’t export a lot to Europe. Not tariff differences.

      • Andrewthecarguy says:

        Exactly.
        And honestly I am hoping the current tariffs climate and impending changes will revitalize the American brands. I remember when Ford re-invented the Explorer based on what it learned from owning Land Rover. It spilled over into Lincoln I am impressed with the current Lincoln line up. I think Ford has a chance to sell Lincoln SUVs in Europe, and they will sell well if properly marketed.

        • I actually am still disappointed with the current American car landscape. Cadillac seemed to be on the right track until GM fired its CEO, Johan de Nysschen, who had righted the ship. Ford could make the Explorer great but it’s only okay and most Lincolns are just rebadged, front-wheel drive Fords. The lack of Americans buying American-made cars has nothing to do with tariffs, it has to do with American cars being mostly garbage and the fault lies in Detroit.

          • Andrewthecarguy says:

            Agreed.
            Cadillac screwed up firing Johan. For the first time in a long time, Cadillac had viable competitors. I mean the CTS-V put the Germans on notice big time. And now they are talking about making changes that make no sense. WTF is with the CT6 and the new naming convention???
            Lincoln is easy to fix from a drive feel perspective. The designs are very nice however and will compete very well in Europe. Also, EcoBoost is awesome.

          • I agree on Cadillac. Huge mistake firing Johan. He really had Cadillac on the rise and it was becoming a brand we could be proud of, globally. We’ll see what happens now. I do like how Caddy is going to be making its own engines, though, AMG-style.

            As for Lincoln’s styling, I agree they look nice. I just wish they were proper rear-wheel drive-based luxury cars. They’re just front-drive, re-deigned Fusions and whatnot. I like the Navigator, though.

        • Anon says:

          Less competition from foreign brands will make American brands produce better cars?

          Is that like how corporate tax cuts got everyone a raise? /s

    • nhanphan1990 says:

      In this case, it’s more like a wingnut’s lack of comprehending or reading skill. Now, please read this paragraph again:

      “Our best sellers, and the sorts of cars American brands make here most, are pickup trucks and SUVs, cars that don’t sell well in the EU. In fact, the most exported American-made cars to Europe are German, such as BMW X models and the Mercedes-Benz GLE-Class.”

      Let me walk you through the comprehending path, since you can’t do it yourself :). US brand’s best sellers are SUV and pick-ups. EU drivers do not have interest in these types of car; and even when they do want some SUVs, those are mostly X or GLEs, which are made in America, but have an German badge on them.

      Get it now? Thou I’m not surprised if you don’t, for some one who sounds like they never made it out of college.

  2. ZeroCold says:

    Nico, you should keep your political opinions to yourself unless you want to lose readers who don’t want this crap on a car web site.

    • Horatiu B. says:

      It’s an opinion shared by mainstream media, we just talked about the same ideas. The post was definitely not meant to be political, and we can’t ignore the current landscape.

    • It’s hard to ignore these topics when they directly affect BMW and it’s workers right here in America. We try not to get political but we have to report what’s going on.

    • disqus_NdrthOMZ62 says:

      The crap is false statements about a multibillion dollar global industry & deserves to be called out.

    • Andrewthecarguy says:

      Really?
      Why?
      It affects the very topic this site is all about.
      Now I want to say you should keep your opinion about what is said on the site to yourself, but, I will not do that, as I am not like you :)

  3. Andrew Trump says:

    The fake news media still hasn’t got it yet. Trump wants FREE TRADE with all nations that means no tariffs. He has been threatening the demonic EU with tariffs to get tariffs removed on United States products. Not just cars. Free trade will benefit all nations.

    • Anon says:

      Hey whacko.

      Trump doesn’t know what he wants. He’s just feeding red meat to zealots like you.

      He’s also said he doesn’t want trade deficits, which tariff free trade will not address.

      He also wants to boost certain industries like metal production through the use of tariffs.

  4. Ted Ankrum says:

    Cut the tariffs–Helps me because I buy European and I don’t care about anyone else, just like the Trumpistas. Won’t do anything for USA exports, though, as “Detroit” cars/SUV’s are crap, compared to European and apart from Corvettes and Mustangs, won’t sell. Jeeps sell well, but I think they are assembled in Italy. Last time I was in Europe, the only US car brands I saw, other than onesies and twosies were FCA, and I wonder if they are assembled there, too. I looked at the Monroney label for my X5 and it says the US content is 30%. So when US exports of BMW X-cars to Europe go up because of reduced tariffs, 70% of increase will go to Europeans.

  5. Vincent Rolfe says:

    Nico, your writing at times is with too many words and repeats the thought from one sentence partially into the next sentence. Read your stuff over and cut the extra words and make it easier to get the drift of your writing. Obviously you are pro BMW and get into a tangle when reversing thoughts half way through a paragraph. Goes back to writing and reading in 4th-6th grade. You must have had the wrong teacher at that time. High school stateside should have been more present in your learning. Just keep the logic simple and words to a minimum. Read over your articles with this in mind.

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