The European Union May Be Safe From Automotive Tariffs

We hope this news turns out to be true.

President Trump has been pushing for a 25% tax on foreign steel and aluminum, which would greatly impact the automotive industry. The tariffs could deliver a massive blow to foreign automakers, particularly German automakers, who control 90% of the luxury market in the US. So far, President Trump has been firm in his resolve, but an Automotive News report indicates that the European Union may be spared from the looming tariffs.

The US ambassador to Germany reportedly reached out to executives from Daimler, Volkswagen and BMW to inform them that Trump may be willing to abandon the tariffs on the EU. Trump would drop the tariffs if the EU was willing to make a deal, and annul its foreign duties on US-built cars. The German Association of the Automotive Industry said "it is clear that the negotiations are exclusively being held at a political level," which is a positive sign. Trump's tactics have sparked fears of a global trade war, but this news gives us hope that concessions can be made, at least with the EU.

These negotiations will have a massive impact on the automotive industry, as German automakers try to convince Trump that tariffs could cause damage to global free trade. It seems as though the EU could solve everything by just caving into Trump's demands, but the EU is not allowed under global rules to decrease its 10% tariff on American cars without a bilateral accord with the US or an agreement with the World Trade Organization as a whole. Although the EU seemingly has a way out of these tariffs, it may not result in the deal Trump has been seeking.

German Automakers Bend To Trump's Will By Offering To Drop Tariffs

Those "very bad" German automakers want to make a deal.

It was an outcome Germany’s automakers could not accept for obvious financial reasons: losing out on the highly profitable US market because of a newly imposed import tax. In light of President Trump’s announcement to impose tariffs on European Union-made products, including vehicles, automakers Volkswagen, BMW and Mercedes-Benz have said they’d be willing to drop all tariffs with the US, according to Automotive News Europe and The Wall Street Journal.

Sources with inside knowledge of the situation claim “German automakers will support the EU’s 10 percent tax on auto imports from the US and a 2.5 percent duty on auto imports going away if Trump backs off” the 25 percent border tax threat on imports from Europe. America’s ambassador to Germany, Richard Grenell, has already met with executives from the German automakers and he’s not taking their proposal directly to administration officials. Another area of concern for these automakers are their US-based production plants and the thousands of people they employ. Trump has already ordered a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

The EU has responded in kind with a 25 percent import duty on a variety of products beginning this week. The German automakers very clearly do not want to be hurt by this trade war, hence their willingness to make such concessions. After all, new Audis, BMWs, and Mercedes are already expensive enough; adding a huge tax to the final price tag will scare away too many buyers.