Home >industry >manufacturing >Auto industry warns only losers to emerge from Donald Trump’s trade war

Berlin: Carmakers and US auto dealers are using a similar refrain to push back against US President Donald Trump’s talk of a trade war: Everyone will suffer if the rhetoric keeps ratcheting up.

“Only losers" will emerge from the US and European Union battling one another with tariffs, said Bernhard Mattes, the president of German auto-industry lobby VDA, which represents carmakers including Volkswagen AG and BMW AG.

Volvo Cars’s chief executive officer and a group representing American auto dealers echoed the sentiment almost verbatim in the wake of a tit-for-tat between Trump and the European Commission’s Jean-Claude Juncker. The comments suggest the auto industry could form a unified front after the president tweeted he could slap levies on BMWs, Audis and other cars shipped from Europe if the US’s planned tariffs on imported steel and aluminium are met with retaliation.

Everybody will lose, including Volvo Cars, if there’s an escalation of trade tensions, CEO Hakan Samuelsson told reporters on the eve of the Geneva International Motor Show. Tariffs could affect the carmaker’s plans to export from a plant it’s building in South Carolina, where half of the 4,000 jobs it’s planned are tied to shipping S60 sedans and XC90 sport utility vehicles to overseas markets.

‘No one wins’

“No one wins a trade war," Cody Lusk, the president of the American International Automobile Dealers Association said Monday. European brands account for about a quarter of the 9,600 international-nameplate auto dealers in the US that the trade group represents. “Auto sales, which are already slowing, will be hamstrung by these tariffs."

Trump tweeted over the weekend that European cars “freely pour" into the US and have created a “big trade imbalance." But with more and more German cars made in America, the nation’s deficit with Europe’s largest economy narrowed to about 64,000 vehicles last year.

The steel and aluminium tariffs Trump announced last week touched off a firestorm that could compromise negotiations to rework the North American Free Trade Agreement (Nafta). US Trade Representative Robert Lighthizer said time is running out to redo the accord as Canada and Mexico pushed back against the levies that the president hasn’t yet finalized.

Preserving Nafta

“I think the American government knows that in the past we had agreements like Nafta that shouldn’t just be destroyed on a whim," Volkswagen CEO Matthias Mueller said in an interview with Bloomberg Television. “We all put our efforts into globalization in the past decades, and I think we shouldn’t give up that idea so easily."

Germany’s new government will stand by its auto industry and make averting a trade war with the US an immediate priority, a top official in Chancellor Angela Merkel’s coalition said. Jens Spahn, the designated health minister, urged Trump to seek a less confrontational path and avoid a vicious circle, signalling that the threat of a trade war has surged to the top of Germany’s agenda.

“We’re watching the current developments with great concern," said Mattes, the German auto-industry lobby president.

Combined, German car factories in the US produced 804,000 vehicles last year, with 430,000 of those exported outside the country. The number of German cars imported into the US has slid about 20% since 2014, to 494,000 vehicles, the VDA said.

GM’s exit

Trump’s beef likely stems from the lack of US brands in Europe. While Ford is among the top mass-market brands in the region, General Motors Co. sold its German unit last year after trying and failing to establish the Chevrolet nameplate in Europe. Fiat Chrysler Automobiles NV sells Jeep vehicles in the region, but Dodge and Chrysler models are rarities because of the region’s preference for smaller cars.

German automakers have been pursuing US expansion for years. Since 2013, brands like Mercedes, VW and BMW have added 5,700 jobs, increasing US staffing to 36,500 people, according to the VDA. BMW’s largest facility in the world is in Spartanburg, South Carolina, which makes SUVs including the X3 for customers in Germany and elsewhere, while Volkswagen is expanding production in Chattanooga, Tennessee.

The current trade arrangement “brings advantages for both sides," said Mattes, the former chief of Ford’s German operations. Trump “shouldn’t now carelessly put this at risk." Bloomberg

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