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German automakers dismayed as US weighs auto tariffs

2018-05-24 14:26

German automakers reacted with dismay Thursday as the United States Commerce Department said tariffs on car imports could be on the horizon, potentially opening a new front in a burgeoning transatlantic trade conflict.

"One-sided protectionism has never helped anyone in the long term. Only free and fair trade secures increased prosperity," a spokesman for industry behemoth Volkswagen told AFP.

Tug of war

American Commerce Secretary Wilbur Ross had announced Wednesday he had initiated a so-called Section 232 investigation on auto trade - which would provide the legal basis to impose tariffs, if his department finds imports threaten US national security - after speaking with President Donald Trump on the matter.

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Ross promised "a thorough, fair, and transparent investigation into whether (auto) imports are weakening our internal economy and may impair the national security."

The move comes as a 1 June deadline approaches for the White House to decide whether imports from the European Union will remain exempt from border taxes slapped on steel and aluminium.

Trump's recourse to national security arguments for potential tariffs echoes his justification for the metals duties.

In a separate statement released by the White House, the president said "core industries such as automobiles and automotive parts are critical to our strength as a nation."

Germany's Federation of the Automotive Industry (VDA) noted that German carmakers employ some 36,500 people in the US and car parts producers 80 000 more.

And it highlighted German firms' "significant contribution to the American balance of trade in cars" with their exports to third countries.

"An increase in tariff barriers should be avoided," the body said, saying it had "always spoken out in favour of mutual reductions in tariffs and for free-trade agreements".

German carmakers exported 494 000 vehicles to the US last year, the VDA said, while the Chambers of Commerce and Industry (DIHK) calculated autos and parts accounted for 28.6 billion ($33.6 billion) of Germany's 111.5 billion euros in exports to the US.

Shares in Volkswagen, high-end BMW and Mercedes-Benz maker Daimler were among the worst performers in the DAX index of blue-chip German shares just before midday (1100 GMT) on Thursday.

Global outcry

Imposing car tariffs would open yet another front in the Republican president's confrontational rows over trade that have drawn global outcry from allies and partners.

"Evidence of significant economic damage due to the trade conflict is mounting," tweeted economist Marcel Fratzscher of the DIW think-tank in Berlin.

"The Trump administration now adding new threats with tariffs on European cars could make things a lot worse."

The latest announcement comes as negotiations with Canada and Mexico over revamping the continent-wide North American Free Trade Agreement (NAFTA) have stalled over auto demands.

Trump had earlier blamed the US neighbours to the north and south for being "difficult" in talks to renegotiate the pact.

The contrast with a Thursday visit by German Chancellor Angela Merkel to Chinese premier Li Qeqiang could not have been starker.

"China and Germany are on the path of promoting multilateralism and bolstering free trade," Merkel said in Beijing.

Meanwhile Japan's trade minister Hiroshige Seko said Thursday that car tariffs would "plunge the world market into confusion" and be "extremely regrettable."

Passenger cars make up around 30 percent of Japan's total exports to the United States and Tokyo has already threatened Washington with retaliation at the World Trade Organization for the steel tariffs.

'Great American autoworkers'

The Wall Street Journal reported earlier Wednesday that Trump was asking for vehicle import tariffs as high as 25 percent.

That would move US policy in the opposite direction from China, where President Xi Jinping recently offered to cut border taxes to 15 percent from 25 percent.

In its statement announcing the inquiry, the Commerce Department cited figures showing that US employment in automobile manufacturing had dropped by 22 percent from 1990 to 2017.

"After many decades of losing your jobs to other countries, you have waited long enough!" Trump wrote in a tweet addressed to "our great American autoworkers".

Trump - whose protectionist platform helped launch him to the White House - has repeatedly floated the notion of steep tariffs that would shield the US auto industry.

He has specifically targeted Germany, and argued that American cars are slapped with higher tariffs than those imposed on European autos.

US cars sold in the EU are hit with 10 percent duties, while the US imposes just 2.5 percent on cars from the EU.

But Washington imposes 25 percent tariffs on European pick-ups and trucks - which the EU taxes at a much lower 14 percent on average.

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