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

Number of migrants now growing faster than world population, new UN figures show

More refugees being helped by family, work and study permits, finds OECD and UNHCR study

Team Europe partners with Equity Bank to support Kenyan business and agriculture amid COVID-19

Crowdfunding: what it is and what it may become

EU threatens Japan to suspend FTA negotiations if…

COVID 19 and the consequences in the fight against HIV

Will the EU reconsider Frontex’s role in light of accusations about violations of migrants’ human rights?

EU readies for eventual annulment of the Turkish agreement on immigrants-refugees

More solidarity and interaction between generations needed to challenge age stereotypes and ingrained ageism

As India’s lockdown ends, a mental health crisis is just beginning

EU approves €100 million for the post-earthquake reconstruction in Albania

Oh, well, you are wrong, Google responds to the European Commission

Taj Mahal closes as European Union considers non-essential travel ban – Today’s COVID-19 updates

The MH17 tragedy to put a tombstone on Ukrainian civil war

Commission launches two projects to support cooperation and innovation in Romanian regions and cities

A chemistry professor explains: why soap is so good at killing COVID-19

There’s a new global technology race. It needs better trade rules

To hope or doubt? The state of women’s progress in the world

Peacekeeping: A ‘great opportunity’ to develop professionally and personally

UN chief welcomes DR Congo President’s promise to stand down

Republic of Korea President proposes DMZ as future ‘peace and cooperation district’ on Peninsula

Burnout is a pandemic. Why don’t we talk more about it?

Friday’s Daily Brief: UN chief in China, counter-terrorism, updates from Bangladesh, Mali and Mozambique

State aid: Commission approves €10 billion Spanish fund to provide debt and capital support to companies affected by the coronavirus outbreak

FROM THE FIELD: Children in warzones denied right to education

Companies must focus on resiliency, profitability and sustainability

The climate and COVID-19: a convergence of crises

The EU moulds a new compromise for growth and financial sustainability

Security Council must ‘come together’ to address the plight of children trapped in armed conflict, says UN envoy

Workplace risks: Final vote on protection from carcinogens, including diesel fumes

Recovery and Resilience Facility: Croatia and Lithuania submit official recovery and resilience plans

Vaccines: from miracle to possible danger

Four lessons for a successful switch to value-based healthcare

We must stop choking the ocean with plastic waste. Here’s how

The 4 biggest challenges to our higher education model – and what to do about them

Reform of road use charges to spur cleaner transport and ensure fairness

Technology can hinder good mental health at work. Here’s how it can help

The scheming of Boris: win an election after a no-deal Brexit

World’s human rights watchdog spotlights Afghanistan, Yemen and 12 others: Here’s the scoop

Why it’s time to take central banks’ digital currencies seriously

A Sting Exclusive: “Technology for all, development for all: the role of ITU”, written by the Secretary General of the United Nations Agency

How India is harnessing technology to lead the Fourth Industrial Revolution

EU’s guidelines on net neutrality see the light although grey areas do remain

Digital Assembly 2021: Leading Europe’s Digital Decade

What wealth managers can learn from family dynamics

Vĕra Jourová, European Commissioner in charge of Justice

The New EU-US “Shield” for data privacy is full of holes

EU survey confirms citizens’ call for EU to have more powers to tackle pandemic

Failure to register newborns leaves millions ‘invisible’ warns UN Children’s Fund

MWC 2016 LIVE: Stripe gives payments leg-up to startups in emerging markets

What lessons to draw from the destruction of Syria

Biblioburro: The amazing donkey libraries of Colombia

The India–U.S. trade dispute and India’s evolving geopolitical role

Syria: UN health agency highlights ‘critical health threats’ facing Idlib civilians

Crisis hit countries cut down public spending on education

One is not born, but rather becomes, a woman

Pakistan: a long road ahead

Century challenge: inclusion of immigrants in the health system

Coronavirus: MEPs call for solidarity among EU member states

Breaking barriers between youth in the new tech era: is there an easy way through?

A Europe that Protects: Commission calls for decisive action on security priorities

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