Chancellor Angela Merkel’s government vowed to stand up for the German auto industry, sending a veiled signal to U.S. President Donald Trump to back off threats to levy tariffs on imported cars and auto parts.
“The German auto industry is the core of the economy, therefore we have an interest that it has a strong position on the world’s markets,” Economy Minister Peter Altmaier said Tuesday in a speech to lawmakers in Berlin. “This isn’t lobbying. This is national interest.”
Trump cited national security in imposing tariffs on steel and aluminum, a move that sparked tension at last week’s summit of Group of Seven leaders. The U.S. president has threatened to extend his America First policies to the auto industry, which would hit Volkswagen AG, Mercedes-Benz maker Daimler AG and BMW AG particularly hard.
The trade dispute is part of broader tensions between the U.S. and Germany. Bickering over anemic German spending on defense as well as the U.S. withdrawal from the Paris global climate treaty and the Iran nuclear accord has led Merkel to conclude the alliance between the two countries is no longer reliable.
Altmaier indicated that he expects little improvement in relations as long as Trump is in power. “Shared values are stronger than any single politician who’s in office for a few years,” said Altmaier, adding that he was not going to start “bashing” foreign officials or utter a “bad word” about trans-Atlantic cooperation.
BMW AG and Mercedes-Benz maker Daimler AG face a double whammy of trade risks. Both carmakers ship significant numbers of vehicles from the E.U., and also export from U.S. plants.
As a result, German carmakers have to worry not only about the potential for higher costs when they ship cars to the U.S., but also any retaliatory measures that affect the cars they produce in North America and send to the EU.
The manufacturers are already rethinking the way they produce in the U.S. BMW, which exports SUVs made at its plant Spartanburg plant in South Carolina, said the company could switch to making sedans there instead in the case of tariffs, purchasing chief Markus Duesmann told German magazine Automobilwoche.
Doing so would be “complex, but doable,” Duesmann said in the interview. BMW is the leading U.S. car exporter by value, shipping vehicles worth some $10 billion last year.
Mercedes produces the GLE, GLS and GLE Coupe SUVs and C-Class sedans at its Tuscaloosa plant in Alabama, while Audi in 2016 opened a plant in Mexico.
The consequences of auto tariffs would be “significant” as carmakers sell regionally, but compete globally, Joe Hinrichs, Ford Motor Co.’s head of manufacturing, said in speech reported by the Financial Times.