Slideshow: Trump's Plan to Rid USA of German Cars
A German business magazine reported that unnamed sources heard Trump tell the president of France he wants to eliminate German automakers from the U.S. Market. We look at what all that may mean.
Exciting Headlines!
News agency Reuters' report, dated May 31 of this year, led off with this shocking sentence: "A report that U.S. President Donald Trump has threatened to pursue German carmakers until there are no Mercedes-Benz rolling down New York’s Fifth Avenue dented shares in the luxury car manufacturers on Thursday." See what they did there? "Dented shares." Clever. What they also did was write a dramatic sentence that no one was ever quoted as saying—though it certainly is attention-grabbing. Reuters reported that the German weekly business magazine Wirtschaftswoche originally published the information that "Trump had told French President Emmanuel Macron in April that he aimed to push German carmakers out of the United States altogether." Reuters' report continues with the following clarifications: the report "did not include any direct quotes," and it, "cited several unnamed European and U.S. diplomats but did not include any direct quotes." When contacted, the U.S. embassy in Berlin referred questions about the alleged conversation between the American and French Presidents to Washington.
Tariffs
This information came a week after the Trump administration opened a trade investigation into vehicle imports. The investigation could result in a recommendation for tariffs as high as 25 percent on vehicles, using the "national security" justification the administration used to implement duties on metal imports earlier this year. If imposed, the tariffs would have a devastating effect on U.S. importation of German cars, cars which account for the majority of premium car sales in the country. Currently German companies, which also own Rolls-Royce, Bentley, and Bugatti, are the largest European Union exporters of vehicles to the U.S. German officials, predictably, are not happy with news of the investigation, though Dieter Kempf, the head of Germany industry association BDI, called for cool heads as trade tensions with the U.S. heated up. He warned Deutschlandfunk radio that any measures imposed by the EU would likely be met with countermeasures by the Trump administration.
Fear and Greed
Reuters reached Daimler, BMW, and Audi—who all declined to comment, while Porsche was listed as, "not immediately available for comment." The markets, however, did react, with BMW shares down 0.5 percent, Daimler down 1 percent, and VW trading at 1.6 percent lower as of at 09:39 GMT on May 31—all underperforming Germany’s blue-chip DAX index.
Promises, Promises?
Though the attributed over-the-top statements are not uncharacteristic for a man known for inflammatory utterances, neither should they be surprising politically. In an early 2017 interview with the German newspaper Bild, Trump stated that he intended to levy a 35 percent tariff on imported automobiles. He acknowledged that Germany was a manufacturer of great cars but felt that, according to Reuters, "the business relationship with the United States was an unfair one-way street." According to VDA, Germany’s auto industry association, its members exported 31.2 billion euros worth of cars, components, engines, and second-hand vehicles in 2017, while their records show that German car-related imports from the U.S. totaled 7.4 billion euros for the same period.
Prognosis
If enacted, a 25 percent tariff would make it financially untenable for Germany to export cars to the U.S., and analysts at Evercore ISI estimated such a tariff would take a 4.5 billion euro toll on Germany's premium auto brands. Worst hit would be Audi and Porsche, who have no have U.S. manufacturing facilities, while Mercedes-Benz and BMW would fare reasonably better since they have sizable and well-established plants in the U.S. that could conceivably step up or expand production to cope with reduced importation. All told, German brands built 804,000 cars in the U.S. last year.
The Art of the Deal?
So what are the takeaways from all of this? Even if partially true, it's been Trump's M.O. all along to throw out verbal incendiary grenades. This time he didn't make statements directly to the media—except when he did last year on the same topic and last week when he opened the policy investigation. It's doubtful that he wants to retire to an N.Y.C. where diplomats are being driven around in Ford trucks, so Rolls Royce and Mercedes-Benz can probably breathe a little easier until trade negotiations are over. And though it's possible that he has something against German cars, we wouldn't bet on him closing German auto plants in the U.S., putting thousands of Americans out of work. As of now, sound and fury make great headlines, but it's more public posturing than news. In the meantime, expect to see the sudden appearance of bumper stickers that say, "When 911s are outlawed, only outlaws will drive 911s" and, "They'll have to pry my Audi from my cold, dead hands."
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