European carmakers’ share rally this year might hit a roadblock as a U.S. probe of auto imports raises the potential of new tariffs, with underperforming German manufacturers particularly at risk.
U.S. Commerce Secretary Wilbur Ross submitted a report to President Donald Trump on whether vehicles made abroad pose a national-security risk, according to a statement Sunday.
Trump will have 90 days for any response and, if he says he’ll move forward with measures under Department of Commerce recommendations, another 15 days to act.
While Trump and European Commission President Jean-Claude Juncker agreed in July to hold off on new tariffs during discussions to resolve an American-European dispute, the U.S. leader’s repeated tweets may indicate he’s primed to add import fees especially targeted at cars from the bloc, according to analysts.
“The risk that tariffs between Europe and the U.S. will come is rather high—I would say slightly more than 50 percent,” Juergen Pieper, an analyst at Frankfurt-based Bankhaus Metzler, said in an email. “Trump seems to have a real problem with German cars.”
The European Union estimated in June that a 25 percent tariff would add about 10,000 euros (US$11,300) to the sticker price of a car made in the bloc and sold in the U.S., and would cut American purchases of vehicles and parts in half.
The Munich-based IFO Institute’s Center for International Economics calculates that an import fee of that size would cut German car sales to the U.S. by almost 50 percent, or about 17 billion euros, eroding total auto exports by 7.7 percent.
Volkswagen, the world’s largest automaking group, and Daimler’s Mercedes-Benz brand and BMW, the two biggest makers of luxury cars, have the most at stake from any U.S. trade penalties, even as they’ve reduced the need to bring in vehicles by building American plants.
The U.S. is the second-largest market for both Mercedes-Benz Cars and BMW, while Volkswagen’s luxury Porsche and Audi nameplates import all their American-sold autos.
Even as American imports have declined in recent years as manufacturers established significant U.S. production, the German surplus of $22 billion is “a particular thorn in the side of President Trump,” said Bernd Weidensteiner, an economist at Commerzbank AG.
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