Ted Malloch: Car Wars

Ted Malloch is the author of Common Sense Business

“The European Union doesn’t take a lot of what we have, and yet they send Mercedes in to us, they send BMWs in to us, by the millions,” President Trump lamented.

“It’s very unfair, and it’s very unfair to our workers and I’m going to straighten it out.”

The US Commerce Department under a Section 232 investigation has just issued a report that would result in the unleashing of steep tariffs on imported cars and auto parts.

Watch Secretary of Commerce Wilbur Ross comment here.

This is all about unfair trade.

It poses a national security risk to the United States.


Is Trump right: are there just too many German cars in America?

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Now some facts.

The German auto industry sold 1.35 million vehicles in 2017 to US buyers.

That is 8 per cent of all our car sales.

The large German carmakers are, Mercedes, BMW and VW Group, which includes Audi and Porsche as well as VW’s.

Of all those German cars some are actually produced in the US. That total is about 800,000, of which half are then exported elsewhere.

BMW has a huge factory in Spartanburg; SC. Mercedes products are made in Alabama; and VW’s largely in Tennessee and Pennsylvania.

Make no mistake; Germany is most at risk in the entire EU from any car war. The French and Italians do not send many units to America at all.

New US tariffs would move up to 25 per cent.
They are presently at just 2.5 per cent.

EU tariffs on all auto imports are presently 10.5 per cent.

You can see the structural imbalance and lack of reciprocity.

Is America stupid?

New US tariffs would add approximately $11,500 to the sticker price of the average German car sold in the US, according to industry estimates.

The effect would likely be a 50 per cent drop in these exports, according to one German economic forecast.

In other words, the $226 billion trade surplus Germany now realizes could quickly vanish.

Look, we are proud of our cars,” Angela Merkel, Chancellor of Deutschland said last week. “We are allowed to be. And these cars are built in the United States of America.”
“If these cars, which are no less a threat than those built in Bavaria, are suddenly a national security threat to the U.S., then that’s a shock to us,”
Yet President Trump seems adamant.
And Germany still refuses to pay its 2 per cent of GDP to the NATO budget so Americans pick up their defense tab.
Trump’s response was, “I love tariffs, but I also love them to negotiate.”
Watch for the coming car wars at a dealership near you.
Common sense dictates reciprocity — at a minimum.

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