Trade War Watch: Volvo Worried About New U.S. Factory, Germans Want Tariffs Killed Entirely

The ground beneath the factory Volvo Cars opened Wednesday in South Carolina grew shakier after company executives warned that the U.S.-China trade dispute could undo plans to create up to 4,000 auto jobs in the state.

As you probably know, Volvo is currently owned by Chinese automaker Geely — which has a lot to lose if trade relations break down. Geely intends to export Volvo’s American-built cars to markets outside the United States. The situation’s a problematic one, as Volvo also imports the bulk of its U.S. market vehicles and any economic hurdles would surely gum up the works.

“If you have trade barriers and restrictions, we cannot create as many jobs as we are planning to,” Volvo Cars Chief Executive Hakan Samuelsson told Reuters during the factory’s opening.

While not a done deal, the automotive tariffs are a very real threat. China already imposes strict fees on imported vehicles (25 percent) and the White House seems to be looking for some kind of payback. While the United States levies a very low fee on imported cars (just 2.5 percent), its truck tariff is extremely high. The Trump administration’s trade proposals would hit imported cars with the existing 25 percent truck tariff. A U.S. tariff matching China’s is already scheduled to impact Chinese-built vehicles starting in early July.

Meanwhile, German automakers have begun voicing their support for the abolishment of all import tariffs for cars flowing between the European Union and the United States. Earlier this week, U.S. ambassador to Germany Richard Grenell brought the proposal to the industry as a possible way to avoid the brewing trade war. The deal would mean removing the EU’s 10-percent tax on auto imports and America’s 2.5-percent fee. It’s certainly a possible solution for Europe, but it doesn’t directly address the problems with China.

“We want to export and if suddenly China and Europe have very high barriers, it would be impossible,” Samuelsson said of Volvo. “Then you have to build the cars there. And then all cars will be more expensive, you have to invest more tooling and have every model in every country. That’s against all the logic of modern economies that trade with each other.”

Volvo claims it intends to hire about 4,000 workers once its new factory reaches full manufacturing capacity. Presently, it only has around 900 employees, but says it needs roughly 1,500 by the end of 2018 to meet production goals.

[Image: Volvo Cars]