The future of the global car industry is in the firing line after a tweet of Trump’s towards China.
Known of his use of Twitter to move markets, the US president threatened that from September 1, NZ$475b of imports from China would be hit with a “small additional 10% tariff.” Beijing responded saying in December, the import duty on US-built cars would jump from 15% to 40%.
China is the world’s biggest car market, ahead of the US at 28.1m vehicles sold versus 20.1m.
The University of Birmingham car expert David Bailey told The Telegraph the car industry is complex, with supply chains crossing borders components moving between countries frequently.
“That’s before you take into account foreign-owned plants producing cars for export around the world. Tariffs are a very blunt instrument and using them has unintended consequences.”
BMW and Daimler have plants in America’s South. The BMW plant in Spartanburg, South Carolina provide 11,000 people who have produced four million cars. The Mercedes spot in Tuscaloosa County, Alabama supports 10,000 more jobs, producing 3.2 million vehicles.
Trump’s tariffs could put pressure on jobs – for instance, BMW exports around 60,000 of its various X models to China each year.
“BMW and Daimler are two of the largest exporters of vehicles from the US to China,” Evercore analyst Arndt Ellinghorst told The Telegraph. “A 25% tariff would cause US $1.7b of extra costs for the two of them, split fairly evenly.”
Volvo opened its first US plant in South Carolina in 2018, but the trade war means Volvo’s strategy of building lower volume cars in one place and selling them worldwide wouldn’t work. Volvo has reshuffled around its factories in Europe and China to avoid tariffs, adding to costs.
US domestic carmakers are also likely to suffer from tariffs, Evercore saying Ford and Fiat Chrysler, who respectively export 40,000 and 10,000 American-built cars to China every year, could face an extra US$320m and US$80m in costs.
Expected to sell around 45,000 vehicles in China in 2020, faces a US$620m bill, but chief executive Elon Musk is building a plant in Shanghai which will dodge tariffs.
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