Republican presidential candidate, former US President Donald Trump speaks to attendees during a campaign rally at Johnny Mercer Theater on September 24, 2024 in Savannah, Georgia.
Brandon Bell | Getty Images
President-elect Donald Trump's pledge to impose sweeping tariffs on all goods coming into the United States could hurt European automakers, with Germany's crisis-hit auto sector believed to be particularly vulnerable.
Speaking on the campaign trail in late September, Trump announced his desire to turn Germany's auto giants into American car companies.
“I want German car companies to become American car companies,” Trump said in Savannah, Georgia. “I want them to build their factories here.” He added that the word “tariff” is “one of the most beautiful words I have ever heard in my life” and “music to my ears.”
Trump has since announced plans to impose new tariffs on China, Canada and Mexico in one of his first acts in office. The measures consist of an additional 10% tariff on all Chinese products coming into the United States and a 25% tariff on all goods coming from Canada and Mexico.
Europe was not mentioned in Trump's first tariff announcement, but EU policymakers are likely concerned that it is only a matter of time before the president-elect turns his attention to the 27-nation bloc's auto sector.
For Germany, the prospect of US tariffs on European cars comes at a time when major original equipment manufacturers, or OEMs, are already struggling.
Volkswagen, Mercedes-Benz and BMW have issued profit warnings in recent months, citing economic weakness and slowing demand in China, the world's largest car market.
Rico Lohmann, chief transport and logistics economist at Dutch bank ING, said the German auto sector appears highly vulnerable to Trump's tariff threats.
Germany is Europe's largest exporter of passenger cars to the United States, with exports last year worth 23 billion euros ($24.2 billion), according to data compiled by statistics agency Eurostat and research firm ING. This represents 15% of Germany's total exports to the United States
Possible tariffs on German automakers would make a bad situation worse, Lohmann said.
“It's the heart of the manufacturing industry, isn't it?” Loman told CNBC via video call. “So, the automotive industry is ultimately linked to the steel industry and the chemical industry, so the entire supply chain is involved here.”
A German government spokesman declined to comment when contacted by CNBC.
Volkswagen, BMW and Mercedes-Benz
While some analysts have chosen not to accept Trump's pledge to transform German car companies into American car companies at face value, they warn that additional US tariffs will exacerbate the challenges facing the global auto industry.
“It was rhetoric on the campaign trail, but there will be some pressure on imports, whether that's through tariffs, or some other type of unilateral action,” said Michael Robinette, executive director of automotive consultancy S&P Global Mobility. CNBC via video call.
“One area that continues to be of concern to a lot of economists, myself included, is the fact that we are still hovering around a 4% unemployment rate in the United States, so trying to push a lot of overtime into the United States is going to be a problem,” he added. .
Volkswagen vehicles are seen in the employee parking lot of a Volkswagen assembly plant on March 20, 2024 in Chattanooga, Tennessee.
Ilya Novelage | Getty Images News | Getty Images
Separate from Trump's proposed tariffs on China, Canada and Mexico, the US president-elect has pledged to impose blanket tariffs of 10% or 20% on all goods coming into the country. However, it remains unclear whether this pledge will become US policy.
“We are evaluating the tariffs proposed by Trump,” a Volkswagen spokesperson told CNBC via email.
The Wolfsburg-based company said more than 90% of the vehicles it currently sells in the US market are produced in North America and meet duty-free criteria under the US-Canada-Mexico Free Trade Agreement (US-Canada-Mexico Free Trade Agreement). . USMCA).
However, it is believed that Trump's proposed tariffs on Canada and Mexico would put an end to the USMCA.
Meanwhile, Mercedes-Benz said it employs more than 11,000 people in the United States, and mainly produces passenger cars and vans at 12 major sites. “We look forward to a constructive dialogue with the new administration in the United States,” a company spokesperson told CNBC.
BMW, which declined to comment on the potential for Trump's tariff threats, has a national footprint of nearly 30 sites in 12 US states, including the world's largest single BMW production facility in Spartanburg, South Carolina.
Shares of Volkswagen and BMW have fallen by about 23% year to date, with Mercedes-Benz Group falling by about 13% over the same time frame.
“Everyone just has to be ready.”
“Trump wants more tariffs, so everyone just needs to be prepared,” Julia Poleskanova, senior director for vehicles and e-vehicle supply chains at the campaign group Transportation and Environment, told CNBC via video call.
“I think it's important for Europe to stay on its own path, whether that's on the European Green Deal or on the electricity agenda. Trump risks putting America behind on a lot of this clean technology and electric vehicles, so it's an opportunity for Europe.” “Actually to speed up at the same time,” Poliskanova said.
“It will be bad news in the short term, for example, for German carmakers, but it is important to understand that this is the way the world is. We just have to do what is best for Europe and European industrial interests – and this is not slowing down,” she added.
