Auto industry closes ranks to oppose Trump's tariff threats

Republican presidential candidate Donald Trump in Las Vegas. (AP File)
Republican presidential candidate Donald Trump in Las Vegas. (AP File)

Geneva - Automotive companies on both sides of the Atlantic pushed back on President Donald Trump’s talk of a trade war with Europe using a similar refrain: Everyone will suffer if his rhetoric becomes reality.

“Tariffs are not good for anybody,” Steven Armstrong, head of Ford’s European operations, said Tuesday in a Bloomberg Television story at the Geneva International Motor Show. “Any form of tariff is going to be bad news for us and lift our costs, and we’re going to pass that through, probably to the consumer.”

Big automakers like Volkswagen and Toyota, smaller manufacturers such as Volvo Cars and PSA Group and even a group representing American auto dealers echoed the sentiment in the wake of a tit-for-tat between Trump and European Commission President 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 aluminum are met with retaliation.

The war of words adds to uncertainty for the auto industry already dealing with disruption stemming from volatile political environments, the decline of diesel and the advent of self-driving technology.

“The world is already chaos, so a little bit more, a little bit less, it’s already chaos,” Carlos Tavares, CEO of PSA Group, the maker of Peugeot, Citroen and Opel vehicles, said in an interview in Geneva. “It’s better that we have an open world where we can trade peacefully.”

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.

Volvo Cars CEO Hakan Samuelsson said that tariffs could affect the carmaker’s plans to export from a plant it’s building in South Carolina, where half of the 4 000 projected jobs are tied to shipping S60 sedans and XC90 sport utility vehicles to overseas markets.

‘No winner’

“There’s no winner in any trade war,” Didier Leroy, executive vice president at Toyota, said in an interview in Geneva. “The risk is for the end customer, who’ll feel the financial impact because he’ll probably pay more.”

The steel and aluminum tariffs Trump announced last week touched off a firestorm that could compromise negotiations to rework the North American Free Trade Agreement. 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 finalised.

“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. “We all put our efforts into globalisation in the past decades, and I think we shouldn’t give up that idea so easily.”

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 automakers in Europe. While Ford is among the top mass-market brands in the region, General Motors sold its German unit last year after trying and failing to establish the Chevrolet nameplate in Europe.

Fiat Chrysler Automobiles 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.

“We are advocates of free trade and hope that’s how it plays out,” said Ford’s Armstrong.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

ZAR/USD
17.04
(-0.38)
ZAR/GBP
21.81
(-0.11)
ZAR/EUR
19.90
(-0.12)
ZAR/AUD
12.03
(-0.12)
ZAR/JPY
0.16
(-1.12)
Gold
1860.65
(+0.03)
Silver
22.87
(+0.11)
Platinum
844.51
(+0.50)
Brent Crude
42.23
(-0.12)
Palladium
2207.00
(+0.59)
All Share
53587.11
(-1.22)
Top 40
49547.74
(-1.16)
Financial 15
9401.28
(-1.95)
Industrial 25
72949.70
(-1.72)
Resource 10
53453.42
(-0.10)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 1367 votes
It depends on how the funds are used.
73% - 8849 votes
No. We should have gotten the loan elsewhere.
16% - 1956 votes
Vote