Tariff moves could derail U.S. investments

GENEVA — If it wasn’t universal condemnation, it was close.

President Donald Trump’s steel and aluminum tariffs and his threat of a “Tax on their Cars” drew everything from eye rolls to outrage at the auto show here — plus retorts from some executives that the gathering storm could derail planned U.S. investments.

Executives were trying to wrap their heads around what many had feared would be the biggest man-made threat to the industry since the Great Recession. The actual tariffs of 25 percent on steel and 10 percent on aluminum, effective March 23, carry exemptions for Canada and Mexico and the possibility of further exemptions, proving somewhat less onerous than what was expected. Even so, executives had to make contingency plans for a global trade war.

The worst-case scenario?

Samuelsson: Consumers lose

“Everybody would lose,” Volvo CEO Hakan Samuelsson said. “This includes Volvo because our whole system is based on free trade. And the consumers would lose out because they will have more expensive goods, including cars.”

Didier Leroy, chairman of Toyota Motor Europe, warned, “If there is some tax, it will raise the price, and the customer pays the bill. Then you have potential reaction from China, Europe, other places in the world, and there is no winner.”

Tweets

Trump got under the skin of European execs with this tweet: “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

The U.S. now imposes a 2.5 percent tariff on foreign-built cars and a 25 percent tariff on trucks and commercial vans. The European Union charges a 10 percent tariff on U.S. cars.

“The EU will be forced to respond to US protectionism, but does not want tradewar!” tweeted a Dutch member of the European Parliament, Marietje Schaake.

Jyrki Katainen, the EU Commission’s vice president, later threatened retaliatory “rebalancing measures” if the EU doesn’t get an exemption. “If the worst-case scenario happens, We are ready to take the U.S. to the [World Trade Organization] court, and we are discussing with other allies and other partners to do it together.”

Tariff details

What the proclamation says

  • Imported steel will incur a 25% tariff.
  • Imported aluminum will incur a 10% tariff.
  • Canada, Mexico are temporarily exempt from the penalties.
  • The tariffs could be modified for other countries.
  • The tariffs take effect March 23.

Bernhard Mattes, former CEO of Ford of Germany and now head of the VDA, Germany’s auto industry lobby, noted that his domestic carmakers manufacture 800,000 vehicles in the U.S., creating nearly 40,000 jobs, including at suppliers.

“We export 430,000 of them, which is nearly as many as we import into the country, so it’s almost parity,” he said.

Industry leaders suggested they would have to review plans and projects.

Tavares: U.S. re-entry at risk

PSA Group CEO Carlos Tavares said his 10-year plan to re-enter the U.S. was at risk.

Tariffs “would have an impact on the way we go to market because we have a very staged and step-by-step approach,” he said. “At the beginning, we would source the cars from outside the U.S., given the very limited volumes. If this was to change, we would have to reassess our strategy.”

The tariffs also could affect Volkswagen’s decision to build its I.D. full-electric vehicles at its plant in Chattanooga, VW Group of America CEO Hinrich Woebcken told Automotive News.

He said tariffs “definitely will be a burden” since VW imports some steel and aluminum on its own and likely will face a markup in costs passed on by its suppliers. “The industrialization of the I.D. for the North American market has not been decided yet,” Woebcken said. “We have several options.”

Hyundai Motor Co. warned it may rethink how many vehicles it builds in the U.S.

“Changes to the existing tariff structure could negatively impact our current U.S. production and further expansion,” said spokesman Jim Trainor. “Imposing tariffs on steel could increase production costs, which could lead to higher prices for U.S. consumers and, potentially, decreased demand.”

‘Creating jobs’

Executives asserted that the current trade structure has brought European and Asian investment to the U.S., including vehicle assembly plants with high levels of local content.

Samuelsson said, “Free trade is creating jobs in South Carolina,” where Volvo is building an assembly plant. “Half of the cars we build [there] will be for export.

“If the end game is investing in [production in] every country for the local market, that is extremely inefficient,” he said. “If we would have to do that for all the countries in Europe, it would be a disaster.”

With tariffs, he said, “The whole system is less efficient, so that means there is less money for quality improvement and product development.

“Any country that tries to protect its own industry ends up putting consumers in a position where they have to accept poor quality,” he said. “In Brazil, for many years, you could see this very clearly.”

Klaus Zellmer, CEO of Porsche Cars North America, said, “Trying to isolate yourself from others in the course of history was never a very good move.”

Katie Burke, Nick Gibbs, Peter Sigal and Douglas A. Bolduc contributed to this report.

Let’s block ads! (Why?)

Automotive News Breaking News Feed

Share This:

Leave a Reply