The U.S. Commerce Department sent a report on Sunday to President Donald Trump that could unleash steep tariffs on imported cars and auto parts. Profits at German automakers are seen most at risk from tariffs on cars they export to the U.S. from Europe.
U.S. government officials have not given any insights into the findings of the report by Commerce Secretary Wilbur Ross on whether vehicles built abroad pose a national security risk.
Automakers and parts suppliers are anticipating its recommendation options will include broad tariffs of up to 20 percent to 25 percent on assembled cars and parts, or narrower tariffs targeting components and technologies related to new energy cars, autonomous, internet-connected and shared vehicles. The Commerce Department alluded to a focus on emerging vehicle technologies when it opened the investigation.
Daimler's Mercedes-Benz brand, BMW and Volkswagen Group have the most at stake from any U.S. trade penalties, even as they have reduced the need to bring in vehicles by building American plants. The U.S. is the second-largest market for Mercedes and BMW cars. VW Group's VW, Audi and Porsche brands all sell vehicles in the U.S.
Trump and European Commission President Jean-Claude Juncker agreed in July to hold off on new tariffs during discussions to resolve an American-European dispute.
Trump has complained since mid-2017 about the German cars’ presence on U.S. streets and tweeted threats to tax German automakers’ vehicles.
Trump's repeated tweets may indicate he is primed to add import fees especially targeted at cars from the bloc, according to analysts. "The risk that tariffs between Europe and the U.S. will come is rather high -- I would say slightly more than 50 percent," said Juergen Pieper, an analyst at Frankfurt-based Bankhaus Metzler. "Trump seems to have a real problem with German cars."
The European Union estimated in June that a 25 percent tariff would add about 10,000 euros ($11,300) to the sticker price of a car made in the bloc and sold in the U.S.
If the U.S. imposed 25 percent tariffs, German car exports to the U.S. could fall by almost 50 percent, or about 17 billion euros ($19.2 billion), according to the Munich-based IFO Institute’s Center for International Economics.
Total car exports would fall by 18.4 billion euros, or 7.7 percent, the think-tank said. Exports from other sectors and to other countries would compensate these effects slightly, so that the total loss of exports would amount to about 11.6 billion euros, it said.
Car and component exports from the EU to the U.S. were $62.5 billion in 2017 while imports amounted to $17.7 billion, according to a Feb. 15 note by Bernd Weidensteiner, an economist at Commerzbank.
Germany accounted for $30.5 billion of the outbound figure, though only $8.5 billion of purchases from the U.S.
American imports have declined in recent years as German automakers established significant U.S. production but the German surplus of $22 billion is "a particular thorn in the side of President Trump," Weidensteiner said.