With no signs of the Trump administration’s trade war with China ending soon, experts say automakers need to be prepared for volatility and added costs. BMW, Daimler, Ford and other automakers that import vehicles into China face more costs, headaches and confusion in the coming months as a result of President Donald trump’s trade war.
China said that it would impose new tariffs by year end on $75 billion worth of US goods, including vehicles, in retaliation for duties the Trump administration has threatened on Chinese goods. China also said it would reintroduce a separate 25% tariff on vehicle imports from December.
Trump responded by saying U.S. companies that do business with China should not look at moving those operations stateside, which isn’t something that automakers with plants there can do easily. If anything, the extra tariffs would make local production more critical to supply dealerships in China to avoid significant price increases from the US and elsewhere.
“Clearly China is trying to send a signal that they will not back down,” Jeff Schuster, president of LMC Automotive’s Americas operations and global vehicle forecasts, wrote in an email. “The intimation here is that the trade war is not going to be resolved any time soon, and the industry needs to be prepared for the volatility and the cost risks. In the end, the Chinese consumer will have to pay more for the imports or brands and will have to absorb the cost of the tariff.”
BMW and Daimler’s Mercedes-Benz brand combined to account for 57% of the 230 115 vehicles exported to China from the US in 2018, according to LMC Automotive. Ford represented 20% followed by Tesla 7%. Tesla, which is building a plant in Shanghai but doesn’t yet make vehicles in China, is on track to import more cars than Ford in 2019.
Overall, about 3% of the vehicles sold in China are made in U.S. assembly plants. U.S. exports of the X3, X5, X6 and other crossovers represent 12% of BMW’s China sales volume last year, the most for any company besides Tesla.
“The tit-for-tat” tariffs, absent from any meaningful negotiations, are damaging to the American auto industry,” John Bozzella, chairman of the ad-hoc group ‘Here for America’, which includes Volkswagen, Daimler and BMW, said in a statement. He said US vehicle exports to China fell by half in 2017 after tariffs were imposed and that another such decline would cost American jobs.
Ford, in a statement, said it exports more vehicles to China than it imports from there to the U.S., and urged the two countries to “work together to advance balanced and fair trade.