By on July 30, 2018

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BMW says it will hike the price of two utility vehicles in China to cope with the additional cost of tariffs on U.S. car imports in the world’s biggest vehicle market. The models are the X5 and X6, both manufactured in South Carolina.

This news comes after China increased import duties on all automobiles from the United States to 40 percent earlier this month. China had previously said it would reduce its already high vehicle tariffs across the board as a sign of good faith — which it did, while simultaneously slapping new punitive tariffs on the U.S. Meanwhile, President Donald Trump has postponed prospective automotive tariffs while negotiations take place with Europe.

If you needed proof that a trade war is on and were wondering how automakers would handle it, look no further. BMW says it will have to raise the models’ Chinese MSRP by 4 percent to 7 percent. It’s a relatively modest increase considering how utterly massive the new import fees are, which indicates a willingness from the automaker to absorb some of the associated costs just to remain in the market. It’s something BMW is not alone in doing, and there could be a valuable lesson to be learned from that. 

“BMW stands for free [trade] but can’t stand still without taking actions to respond to the market changes,” a BMW spokeswoman explained to Reuters

The actions taken by the German manufacturer appear to involve doing whatever it takes not to lose out on occupying the world’s largest automotive market. Keep in mind that practically every automaker under the sun complained to the United States that the mere prospect of tariffs would induce price increases, layoffs, and reduced investments. The rhetoric against China has not followed the same path.

Ford has already stated it will not increase prices in Asia, as it doesn’t want to further hamper its ability to do business there. General Motors, which builds and sells a large number of vehicles in China already, claims it’s assessing the potential impact of all trade actions and proposals but has made no decisions as of yet. Fiat Chrysler is doing the same.

However, Reuters found that Mercedes-Benz increased pricing on its American-made crossovers this month. Chinese dealers claim the GLE, which is shipped over from Alabama, had undergone a moderate increase in price. Mercedes boss Dieter Zetsche said last Thursday that Daimler is already looking at ways to mitigate the impact of the trade war. Possible solutions include shipping some U.S. production to China.

It’s almost like the auto tariffs from China are working in its favor. This begs the question as to whether or not the United States should just bite the bullet and pull the trigger on the fresh duties Trump is threatening. Granted, China has framed the automotive import fees against the U.S. as a retaliatory measure, but neither side is innocent.

The People’s Republic imposed draconian rules on foreign automakers (and other industries) for years while the Western World assumed it would someday meet them in the middle. That’s not how things played out. Instead, China has been so wildly shrewd that it managed to amass a ludicrous amount of wealth and bargaining power. Now it’s throwing Europe a bone while telling the United States to go kick rocks.

Frankly, it’s rather impressive what China managed to achieve. But it appears to have been at the expense of the United States, with no clear solution in sight. Presumably, if automakers are willing to cave in order to continue operating in the Chinese market, they would do the same for the United States. But to what degree is the real question, as the United States is not a growth market. China has far more citizens, and a greater number of them become car owners every year.

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13 Comments on “BMW Raising Prices on American-made SUVs in China, Willing to Absorb Some Tariff Costs...”

  • avatar

    Not sure if tariffs are the answer, but given that China has owned the US now to the tune of $300B plus in excess trade year over year, something should give. From being forced to join a (typically Chinese government-influenced) joint venture, to facing high tariffs on goods made in the US but sold in China, to having intellectual property either handed over or outright stolen, enough is enough. Though not a fan of the original TPP, I do see that it held value as a curb against Chinese influence that we gave up being a part of. Of course, China plays the long game, and I’m not sure we have the collective memory to last long enough to address these issues without crying uncle due to higher prices.

    • 0 avatar

      TPP was a trojan horse that would have buried this country. China has already infiltrated NAFTA, and we only have to keep Mexico and Canada in check for it to function. Imagine trying to maintain the allegiance of a dozen countries. That’s why Trump demanded transition to bilateral-only trade deals.

      TPP was a death sentence for this country, and we still aren’t out of the woods yet, since half the people in Congress are on China’s payroll, and they want to bring the old TPP back.

      • 0 avatar

        Joe Biden and his son Hunter should be breaking rocks in Leavenworth. Talk about treason.

      • 0 avatar

        If you create advantageous terms for American companies to sell to a dozen other markets and for American consumers to buy from those markets, and specifically keep China out, you are advancing American interests at the expense of Chinese interests. Having a dozen separately-negotiated deals with those countries is a much bigger lift, and provides no meaningful benefits to justify it. The math here isn’t very complicated.

        But congratulations to the TTAC IT gremlins for allowing me to log into the site for the first time in three days!

        • 0 avatar

          @ Astigmatism

          Creating a multi-lateral contract that allows trade between the member nations, but keeps out the second largest economy in the world is self-defeating. TPP was designed from its inception to create a trade bloc that the US and China would bid for, and the Chinese would use money siphoned out of the US.

          We can’t even keep our NAFTA trading partners under control, though these governments are supposedly our allies that have a vested interest in strengthening the North American economy.

          Nothing we have tried with other nations works. Even the threat of crippling sanctions isn’t enough to get Trudeau to represent his own constituency. We have reached the point where we are either going to destroy foreign governments who have betrayed us or we are going to withdraw from terrible trade deals and plot a new course.

          I prefer the latter. Making the problem bigger and much worse was also on the ballot, but we dodged that bullet.

          • 0 avatar

            “TPP was designed from its inception to create a trade bloc that the US and China would bid for.”

            Huh? No, TPP was designed from its inception to be a trade bloc that would provide a bunch of countries, including the US but excluding China, a mutually beneficial trading platform. By uniting them into a shared market, it would allow other Asian countries to counterbalance Chinese attempts to dominate its neighbors due to its greater size and GDP, under terms driven largely by American negotiators and in our interests. If China wanted decent access to those markets going forward, it would have had to come to a table whose rules we’d already set. Now we’re off on the sidelines.

            “Even the threat of crippling sanctions isn’t enough to get Trudeau to represent his own constituency.”

            There is a degree of irony in this statement that I can’t quite describe without resorting to mathematical symbols.

  • avatar

    This article is raw meat for Chicken Tax Dundee.

  • avatar
    el scotto

    “If they aren’t molesting little children on CSPAN”. Has TTAC lost all sense of dignity? I realize that the overweight, seldom-laid white guys think this a place to air their political griefs/views but that comment was waaaaaay over the line. Kyree or Adam; what say you?

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