Trump’s commerce threats shake German automobile giants – DW – 10/23/2024 | EUROtoday

Donald Trump’s US presidential election marketing campaign rally in Georgia final month was surprisingly acquainted, with the Republican candidate telling supporters: “I want German car companies to become American car companies.”

Subject to his successful a second time period within the White House, Trump promised that any overseas automaker that chooses to extend manufacturing within the United States would obtain the bottom taxes, power prices and crimson tape. But then got here a brand new risk of “very substantial tariffs” on automobiles not made within the United States. The rhetoric had robust echoes of Trump’s 2016 election marketing campaign pledge to Make America Great Again by bringing again manufacturing from overseas.

For some, like Detroit-based automotive analyst John McElroy, the brand new remarks had been nothing greater than typical Trump hyperbole that they suppose he’ll battle to enact. “It’s hard to parse what is Trump bombast and what will be Trump policy,” McElroy informed DW. “He says a lot of crazy things. If he wins, we’ll get a clearer idea of what he intends to do.”

German companies upped US investments

Despite criticism from Trump throughout his first election marketing campaign in 2016, German automakers averted a threatened 35% tariff by negotiating new investments in US manufacturing, together with Volkswagen’s electrical automobile (EV) growth in Tennessee, $1 billion (€930 million) promised by Mercedes Benz in Alabama and BMW’s ramping up of manufacturing in South Carolina.

But Jacob Kirkegaard, senior fellow on the Brussels-based suppose tank Bruegel, informed DW that German automakers must be “very worried,” as Trump’s new plans might be much more pricey for them.

“All the investments that the German automakers made into the US in recent years isn’t going to save them,” Kirkegaard mentioned. “Because of the level of investment and integration made in recent years, they will probably face a bigger supply chain shock than most others.”

Trump U-turn on EVs would harm

At situation is Trump’s vow to roll again subsidies for electrical automobiles — a key plank of US President Joe Biden’s inexperienced funding growth. Much of the money underwritten by German carmakers within the US over the previous six years has been to assist ramp up EV manufacturing. So any transfer to reverse course might require a separate provide chain for the continued manufacturing of combustion-engine automobiles within the United States, Kirkegaard mentioned.

“We’ve seen what happened in Germany when subsidies were eliminated — sales of electric vehicles plummeted,” mentioned McElroy, who is also the president of Blue Sky Productions, which created the Autoline Network that gives auto trade information and evaluation. “I think we could see the same thing here [in the US]which would affect not only the German brands but anyone pushing into electric vehicles.”

Trump takes goal at Mexico-based automobile manufacturing

German manufacturers might get additional caught up in Trump’s ultimatum to producers in Mexico. The Latin American nation is a significant manufacturing hub for the likes of Volkswagen, BMW and Audi — principally for the US market. Trump has often threatened automakers that transfer their manufacturing to Mexico, the place prices are decrease, with a 200% tariff.

“Mexico is a very important location for the German automotive industry,” the German Association of the Automotive Industry (VDA) mentioned in a press release printed in The world newspaper in October. “German manufacturers have their own plants there, where a new production record was achieved with 716,000 passenger cars last year.”

German carmakers working in Mexico additionally profit from favorable commerce circumstances due to the US-Mexico-Canada Agreement (USMCS), previously NAFTA, which was negotiated beneath Trump’s presidency and is scheduled for evaluation in 2026.

As in Germany, the place automobile producers complain a couple of scarcity of expert employees, the United States can be seeing a significant expertise hole after many years of offshoring and as older auto employees retire.

“We are already seeing that German companies based here [Mexico] are having to lend staff to their sister companies in the United States to fill the gaps,” Johannes Hauser, managing director of the German-Mexican Chamber of Industry and Commerce (AHK), informed German public broadcaster ARD’s Tagesschau information website earlier this month. “That shows how dramatic the situation has become in the US.”

Battle for Europe, China and now the US

With Trump threatening much more protectionist insurance policies, German automobile manufacturers now face an ideal storm in an ultracompetitive international auto sector. They’re additionally dealing with slower progress in Europe and have been considerably usurped by Chinese manufacturers within the race to launch new EV fashions, which is hurting gross sales in China and Europe. The German producers might dwell to remorse their joint ventures with Chinese automakers in the event that they get caught up within the ongoing US-China commerce conflict.

“If the US government says ‘Not only do we not explicitly want Chinese branded cars in the United States, we also don’t want cars that rely on any form of Chinese technology,’ that could also include German-branded cars,” Kirkegaard mentioned.

Unlike their Chinese counterparts, Germany’s automobile manufacturers are nonetheless extremely worthwhile, have robust model consciousness and are held in excessive esteem, which is able to proceed to assist them overcome these commerce hurdles.

“I, for one, am certainly not willing to write them off,” Kirkegaard mentioned. “They will get through this, but they will likely come out, in terms of employment, significantly smaller.”

Edited by: Uwe Hessler