The German automotive industry under the Trump spell

US President Donald Trump shakes hands with German Chancellor Angela Merkel. The French President Emmanuel Macron looks on. More than 70 world leaders went to Paris for the Centennial of the 1918 Armistice Day ceremony on Sunday, November 11, 2018. (Official White House Photo by Shealah Craighead).

Last week, the White House invited, or better summoned, the leaders of the German automotive industry to Washington D.C., in order to confer on the ‘problem’ of the missive imports of German cars in the US. The American President Donald Trump, in his belligerent line aggressively reshaping the American foreign trade policy with China and Europe, has threatened to impose super tariffs of 25% on US imports of cars assembled in Europe, that is, in Germany. Actually, no other EU country is exporting noticeable numbers of automobiles to America, France included.

The trade skirmishes started last March with the US imposing super import levies on steel and aluminum products. The Europeans answered with extra tariffs on a long list of American products, but of a small overall value of €2.6 billion. Then, the White House threatened to retaliate with tariffs on imports of vehicles assembled in Europe. Last July, though, after Trump met with the European Commission President Jean-Claude Juncker in Washington D.C., the White House said it withholds the imposition of the super levy on cars for a few months.

After that, the White House tried to ‘convince’ the Europeans to introduce self imposed restrictive quotas. Brussels, however, swiftly rejected this prospect. That’s why the US administration now wants to settle the issue, starting by terrorizing the automotive leaders.

Terrorizing the German car sector

Unquestionably, the American administration under Trump longs for a sweeping reduction of imports of European, aka German, cars. Reportedly, the ‘invitation’ to the German leaders of the automotive industry has as main objective some kind of self imposed restrictions. As a matter of fact, though, the CEOs of Volkswagen, Daimler and BMW cannot negotiate any official or ‘private’ trade deal with the Americans.

This falls exclusively and unquestionably under the jurisdiction of the European Commission. The German automotive taicoons can’t even negotiate a secretive unofficial agreement with the Americans. The Brussels authorities will surely find out and will refer the offenders to the European Court of Justice. Already, the German courts are issuing rulings punishing the automotive firms in relation to the diesel emissions scandal.

Punishing the automotive firms

In the latest case, the Augsburg civil court issued a decision against VW. The court said WV cheated the buyer of a WV Golf and ordered the company to reimburse the consumer with the full amount he paid for it, of around €30,000. Of course, not all legal suits in Germany against WV have turned out similar decisions. In any case, WV agreed to pay billions of dollars to settle comparable cases in the US regarding the authorities, car owners and the company’s dealers. In total, WV has proposed to buy back 500,000 polluting diesel cars, for having been fitted with illegal software.

Coming back to Washington, it’s not clear what exactly the White House may ask the German automotive leaders. The German car producers have already stated clearly they cannot discuss any trade agreement and have clarified that this pertains to Brussels. If the American administration is convinced that the German automotive CEOs cannot deliver a private trade deal, the White House will look for other means to attack the imports of German vehicles.

No mercy for German vehicles

Already, the US has severely punished the German automotive companies which assemble their products in Mexico and export them tax free to the US. This was done with the recent replacement of the time cherished NAFTA (North America Free Trade Agreement), with the new USMCA (United States, Mexico, Canada Agreement) trade deal.

The main change introduced under USMCA in the trade between Mexico and the US had to do with German cars. The cars produced in Mexico by German companies must from now on incorporate North American added value of at least 75%, in order to be exported tax free to the US. Under NAFTA, this percentage was only 62.5% and very generously estimated.

The Mexican route blocked

For at least quite some time then, this route to export German cars to the US will be blocked. The reason is that the German car factories in Mexico are simple assembly lines and do not produce engines or important components. These are imported from Germany. Thus, it’s rather impossible to fulfill the 75% condition of local added value, at least not with the present character of the German investments in Mexico.

Undoubtedly, the White House invitation to the CEOs of VW, Daimler and BMW doesn’t envisage anything good for them. For one thing, it’s not certain if Trump himself is to be present. The three firms export to the US around 650,000 cars a year, directly from German factories.

Trump’s spell

On top of that, they ship to America components used either for repairs or to assemble more cars within the US. In total, the German automotive exports to America amount to nothing less than $50 billion a year. No doubt many jobs in Germany depend on that. As a result, the White House has a strong argument vis-à-vis the German industrial leaders. Even the exports to China of German cars from US factories fall under Trump’s spell.

For sure then, the Trump administration is to press Europe’s automotive sector, with Germany being practically the only possible victim. A double digit tariff or any other barrier on automotive imports in America will hit all the German car firms, and, more particularly, Daimler. The last company’s expensive S-Class and E-Class Mercedes-Benz limos will be hardly hit by whatever levies or other trade barrier the White House may impose.

 

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

The 28 EU leaders show contempt for the European Elections results

The 100-year climate catastrophe of Mont Blanc

COVID-19 will accelerate the revolution in energy systems

Conflict prevention, mediation: among ‘most important tools’ to reduce human suffering, Guterres tells Security Council

How to build a digital infrastructure that benefits emerging economies

NextGenerationEU: European Commission gearing up for issuing €250 billion of NextGenerationEU green bonds

AI looks set to disrupt the established world order. Here’s how

Shenzhen just made all its buses electric, and taxis are next

OECD Secretary-General: coronavirus “war” demands joint action

Laws must protect, ‘not reject’ says UNAIDS chief on Zero Discrimination Day

JADE Spring Meeting 2015- Europe’s Junior Entrepreneurs together for 4 days of networking, workshops and forward thinking

A day in the life of a refugee: why should we care?

Decades of progress ‘can be wiped out overnight,’ UN chief laments at climate session in Yokohama

Coronavirus response: Team Europe support to Sudan through EU Humanitarian Air Bridge flight

Mandela, ‘true symbol of human greatness’, celebrated on centenary of his birth

The water where baby fish are outnumbered 7 to 1 by plastic

EU Summit’s major takeaway: a handkerchief cannot save Greece from austerity

Coronavirus: 23 new research projects to receive €128 million in EU funding

South-South Cooperation ‘accelerates’ us toward 2030 goals, UN Chief says on International Day

Back to the future: flying cars are becoming a reality

Peacekeeping chief honours Tanzanian troops in Zanzibar, a year on from deadly DR Congo attacks

UN Human Rights Council resolution on youth and human rights: a step forward for youth rights

Who holds the key to the future of biotechnology? You do

Human trafficking: stronger measures to protect women, children and migrants

We need to rethink the way we heat ourselves. Here’s why

The US and EU decisively oppose Erdogan’s plans for Turkey and beyond

Social Committee slams the 28 EU leaders for false promises

Antitrust: Commission imposes interim measures on Broadcom in TV and modem chipset markets

This is the most popular type of home in Europe right now

European Super League: Why more football is an imperfect solution to sport’s business model problem

Here are 5 of the biggest threats to our oceans, and how we can solve them

Promoting Primary Health Care to the Young Health Workforce: a new approach

Antitrust: Commission opens investigation into possible anticompetitive behaviour by the power exchange EPEX Spot

The European Council takes more measures to stem illegal migration

These floating homes could protect people from flooding as sea levels rise

5 ocean success stories to chase away the blues

State aid: the Commission authorises the regulatory mechanism for the storage of natural gas in France

Tsipras bewildered with Berlin’s humiliating demands; ECB expects political sign to refinance the Greek banks

Greenpeace’s saints and sinners in the tech world

Commission launches new edition of the Cultural and Creative Cities Monitor 2019

No way out for Eurozone’s stagnating economy

10 ways central banks are experimenting with blockchain

How to solve COVID’s crew change crisis and protect global supply chains

Mali just took a huge step towards universal healthcare

Ministers for Youth miss the opportunity to improve social inclusion of young people

Progress on gender equality is too slow, says OECD on International Women’s Day

This weather index measures climate-related risks. Here’s how

Road safety: Europe’s roads are getting safer but progress remains too slow

EU budget: Boosting cooperation between tax and customs authorities for a safer and more prosperous EU

MWC 2016 LIVE: Intel focuses on 5G “beyond the Powerpoint”

5 lessons for the future of universities

Password managers aren’t all they’re cracked up to be. Here’s why

Big world banks to pay $ 4.95bn for cheating customers; Is it a punishment or a gentle caress?

This is why mental health should be a political priority

EU-China relations under investigation?

Climate change adaptation: MEPs want the EU to be better prepared

Does the West play the Syrian game in Egypt?

Air pollution: Most EU Member States not on track to reduce air pollution and its related health impacts by 2030

Can collective action cure what’s ailing our food systems?

Technology: The new face of Medicine

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s