In the growing trade standoff between the U.S., China, and Europe, spearheaded by President Trump, a number of automakers that manufacture thousands of vehicles in the U.S. are facing threats to their business on a global scale. German manufacturers BMW and Mercedes-Benz may face the greatest challenge going forward.
According to a report by Automotive News on Monday, the two German companies stand to lose the most from the trade spat, which has resulted in a 40-percent tariff on U.S.-built vehicles sold in China. As a result, Daimler AG, parent company of Mercedes-Benz, lowered its profit target for the year and expects to take a hit despite record sales so far in 2018.
BMW, as reported earlier, plans to hike the price of its U.S.-built SUVs in China, including the X3, X5, and upcoming X7 models.
The tariffs, instituted by President Trump as an attempt to protect American trade interests, may end up hurting American workers. Mercedes-Benz employs 3,700 people in its Vance, Ala., plant, and BMW just invested $600 million in its Spartanburg, S.C. production facility to increase annual capacity to 450,000 units to accommodate the new X7 flagship SUV, expected to be popular in China. The Spartanburg plant employs about 10,000 people at the moment, and BMW remains the largest automotive exporter in the U.S., with vehicles delivered to 140 global markets.
The proposed 25-percent import tariff on vehicles from Europe stands to hurt the German brands even more. They could take a $5.2-billion hit if the Department of Commerce decides European imports are a threat to national security. It’s unclear whether these setbacks would cause production decreases or layoffs at U.S. facilities, but cost-cutting measures are not out of the question, especially as retaliation to the administration’s tariffs.