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Automakers Bracing for Potentially ‘Devastating’ Tariff Consequences

In addition to Daimler AG, other automobile makers have now spoken out against President Donald Trump’s proposed tariffs. A Bloomberg article published on July 1, 2018 reported that BMW, Ford, and Tesla are additional automakers who may find the tariffs to be devastating. Wang Rongzhen, an executive of Yan’an Jinchi Feike Auto Sales and Service Co. in China, used the term “nightmare” when discussing the tariffs. The gains global automakers got this past week from lower import tariffs were more than welcome, but the trade war might change all of that once Trump’s retaliatory 25 percent levy kicks in on Friday.

Auto dealers in China are very concerned about the prices of imported vehicles such as Mercedes-Benz automobiles because they cannot guarantee promised prices after Friday. Chinese citizens are reconsidering what cars to buy, or if they should buy new cars at all. Not only is the price of production and parts a concern, but the cost of repairs could potentially spike as well. With the Chinese yuan depreciating, Chinese consumers are already paying higher prices for vehicles. The threats and impositions of tariffs between the United States and China have been back-and-forth for weeks and they could have a potentially enormous impact on both countries. To give some perspective, in 2017, North American-produced cars accounted for 10% of all Chinese vehicle imports and amounted to about $13.5 billion of China’s $51 billion of vehicle imports (over 25%).

We are still awaiting the results of the investigation into whether or not imported automobiles are a “national security threat,” but there has been a significant amount of criticism regarding it. In fact, Haley Walters of Greenville News reported on July 2, 2018 that BMW had written a letter to the U.S. Secretary of Commerce and stated, “The domestic manufacture of automobiles has no apparent correlation with U.S. national security.” BMW is concerned that the tariffs will drastically raise production costs and put many jobs at risk at its South Carolina plant. Also, Walters noted that BMW had planned on investing $600 million to make upgrades at one of its facilities but that the tariff impositions and retaliations “make the U.S. a less appealing option.” Harley Davidson has already said it will be moving a lot of production out of the U.S., which Trump is furious about, even tweeting last week that “they will be taxed like never before!”

A July 2, 2018 Politico article by Sabrina Rodriguez and Doug Palmer reported that the president of the American Automotive Policy Council, Matt Blunt, released a statement indicating that the U.S. has “good intentions” but that American automakers believe the tariffs will “undermine the enormous economic contributions the U.S. auto sector makes to our economy.” The council represents Ford, GM, and Fiat-Chrysler, which join other corporations like Hyundai, Toyota, Kia, and Daimler in opposing the tariffs. Ford specifically spoke out and claimed that “it’s essential that governments work together to lower, not raise, barriers to trade.” Tesla and Fiat Chrysler have not released their own statements, but the Bloomberg article noted that Tesla is “particularly vulnerable” since the corporation does not have a manufacturing plant in China.

Jeff Daniels of CNBC reported that Canada has already imposed tariffs on products including orange juice, soups, whiskey, and more. China is planning on imposing 25% tariffs on $34 billion worth of products. Mexico also has plans to slap tariffs on billions of dollars worth of goods as well as increase existing tariffs on goods such as cheese. Despite the unending backlash Trump is receiving for the tariffs, he remains confident about the imposition of them, including the automobile tariffs. The aforementioned Politico piece mentioned Trump’s June 1st Fox News interview in which he indicated he still believes there will be “no tax” on consumers because automakers are “going to build their cars in America.”

The consequences of Trump imposing the tariffs are unknown and more and more people and corporations are speaking out against them, but Andy Puzder of Fox News made an interesting point when he stated, “President Trump’s actions on trade shouldn’t surprise anyone who followed his 2016 presidential campaign.” This is true, as Trump has promised all along that he would put up a never-ending fight for fair trade throughout his presidency. Despite stating that he truly wants to make a deal with other countries, most notably China, he also continues to express that it absolutely needs to be a fair deal for the United States.

Kimberly Hurley
Kimberly Hurley
Kimberly Hurley is a contributing writer and investigative journalist for CBT News, with over a decade of experience specializing in automotive, healthcare, and manufacturing. She enjoys working with industry professionals throughout the world to develop engaging, and accurate content.

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