U.S. Gives German Auto Industry Zero-tariff Proposal, Merkel Receptive
The fresh threat of new automotive and parts tariffs from the United States has everyone up in arms. We recently published an exhaustive list of comments manufacturers and local governments made to the U.S. Commerce Department. They, along with suppliers, universally despise the idea and are doing everything in their power to convince the Trump administration to reconsider. Many are even discussing the grim prospect of layoffs and suspending investments.
However, the president remained firm on doing whatever it takes to bolster domestic production and U.S. automotive exports while the world tried to make sense of his strategy. Was this a madman playing hardball and gambling with the industry’s future, or the work of a master dealmaker forcing others to come to the table? Perhaps a little of both?
Earlier this week, the U.S. ambassador to Germany told German car executives that President Donald Trump would suspend threats to impose tariffs on cars imported from the European Union if the European Union lifts duties on U.S. cars. But the wildest part of all of this is that both the automakers and the German government seem to be in support of it.
According to Handelsblatt, Ambassador Richard Grenell told executives from Daimler, Volkswagen, and BMW during a secret meeting on Wednesday that Trump wanted the EU to eliminate duties on U.S. cars imported to the bloc. In exchange, America would suspend plans to impose new tariffs on European-made vehicles and parts.
Currently, the United States imposes a 2.5 percent tariff on European cars and a 25 percent tariff on light trucks, while the the EU has a 10 percent tariff on imported American cars. German automakers began pushing for a zero-tariff deal after news of the tariff threat circulated.
On Thursday, German Chancellor Angela Merkel addressed the issue by saying she would support lowering European Union tariffs on U.S. car imports. “When we want to negotiate tariffs, on cars for example, we need a common European position and we are still working on it,” Merkel said. “I would be ready to support negotiations on reducing tariffs, but we would not be able to do this only with the U.S.”
Automotive News is already reporting that Verband der Automobilindustrie (VDA), which represents Germany’s car manufacturers, is stoked over the notion of lowered trade barriers. “But it is clear that the negotiations are exclusively being held at a political level,” the group included in its statement.
WildcatMatt on Jul 20, 2018
Here are the two facts to refer to when weighing this news: 1) Trump says he wants unilateral deals. 2) Merkel may be receptive but can't act unilaterally per EU rules. Even if the EU agreed to it, Trump might still reject it because it would be multilateral. This is Kabuki theater no matter how it plays out.
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