Trade War Watch 16: Hot Wheels Just Got Hotter

by Cammy Corrigan

Published: October 25th, 2010

trade war watch 16 hot wheels just got hotter

It’s been some time since since we had a “ Trade War Watch” on mounting trade tensions in the auto industry, and thank goodness for that. In this economic climate of cuts, currency swings and bankruptcies, what we need are things which will make the situation worse, right? In May I reported about how the EU put a 20.6 percent tariff on aluminium wheels from China. The EU did this in response to complaints from domestic manufacturers. Naturally, this left a sour taste in China’s mouth. Well, over 5 months later, you’d think that the EU would have calmed down and this nasty business would be swept under the carpet, right? Erm, not quite….

Bloomberg reports that the EU have not only turned the temporary tariff into a 5 year tariff but increased it from 20.6 percent to 22.3 percent. Chinese exporters like YHI Manufacturing (Shanghai) Co. and Zhejiang Wanfeng Auto Wheel Co. will get hit by this new tariff. But not only will they get stung, but also BMW and Renault will because they buy these wheels from Chinese suppliers. Thus, the price of their cars will rise. The tariff is expected to be imposed by November the 11th.

Naturally, the EU defended this move by claiming that the benefits of this duty outweigh the disadvantages which come on the carmakers. Aluminium wheels are about 1 percent of the total cost of a car, therefore, the cost increase can’t be no more that 0.22 percent according to the EU. “Even this maximum cost impact appears limited in the view of the turnover achieved by car makers,” said the EU. Some automakers have threatened that this move would force them to move production abroad, but the EU dismissed this threat as “disproportionate”.We”ll keep an eye on the news to see how (or indeed “if”) China hits back. Remember, the EU have far more to lose by China imposing tariffs on EU goods than the other way around. After all, China is far more important to the EU as a market than as a manufacturing center. The EU has 501,064,211 potential customers for Chinese products. China has 1,338,612,968. In this poker game, the EU are holding a four of a kind, China’s got a royal flush.

#China #EU #Suppliers #TradeWarWatch #Tuners #Wheels

Cammy Corrigan

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4 of 19 comments

TR4 on Oct 25, 2010

Aluminium wheels are about 1 percent of the total cost of a car, therefore, the cost increase can’t be no more that 0.22 percent according to the EU. 1%? So on a $30,000 car you can buy four new wheels at the dealer for $300? Maybe they meant each wheel was 1%!

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- John Horner on Oct 25, 2010
  
  Which goes to show you that the price charged for wheels at your local friendly dealership parts counter includes massive markups.
  
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John Horner on Oct 25, 2010

"The EU has 501,064,211 potential customers for Chinese products. China has 1,338,612,968."

Uh, that is not the only way to look at it nor is it the most relevant. The relevant number to look at the monetary balance of trade between the EU and China.

The most recent report I was able to find quickly dates to the first half of 2009. In that period the EU exported 37 Billion Euro worth of goods to China whilst importing 103 Billion Euro worth from China. Thus, China is fact has more to loose in a trade war with the EU than does the EU.

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-27112009-AP/EN/6-27112009-AP-EN.PDF

The issue of comparative labor and environmental standards is likewise a very real one.

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- Stuki on Oct 26, 2010
  
  Simply looking at headline numbers don't really tell you anything. If the Chinese buy $100 billion worth of luxury cars and LV bags from Europe, but Europe buys $37 billion worth of parts that goes into final products that will now be forced to compete on the world market with higher costs, Europe could very easily have more to lose than China. Of course reality is more nuanced (i.e. China does import lots of German industrial machinery), but without looking into the composition of the headline numbers, as well as the price and availability of substitutes, deciding who "has the most to lose" is really just a guessing game, even if it should somehow be a useful metric for anything.
  
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