President Donald Trump's continuing auto trade threats raised eyebrows last week while his Commerce Secretary backed away from an August deadline for determining whether to enact stiff new tariffs on European auto imports.
The White House continued to feel pressure, especially from the auto industry, to back down on proposed tariffs that, critics fear, could hamstring a domestic new car market that is already losing momentum after nearly a decade of strong growth.
Trump made trade, and the auto industry in particular, a central topic during a campaign rally in West Virginia earlier last week. But he offered some questionable points to support his argument that Europe and China have been unfair to U.S. automotive manufacturers.
The president has routinely called out both trade partners for imposing hefty tariffs and other trade barriers allegedly meant to keep out American-made vehicles.
But his math seemed weak when Trump claimed “taxes and taxes and taxes” meant that Chinese consumers had to pay $119,000 for a Chevrolet Camaro.
There’s no question that a 25 percent tariff and other fees, as well as shipping and other mark-ups by Chevy, mean that Chinese consumers pay more for the performance coupe than the base, $25,905 cost in the U.S. But the actual price there is a much lower $58,430, or about 399,000 yuan.
It was just one of a number of gaffes made during the Make America Great Again rally, however. And Chevrolet found itself in the middle of another when Trump asked the crowd how many of the maker’s products they might expect to find “in the middle of Berlin.” He answered his own question, claiming, “Not too many. Maybe one?”
While registration data for the Berlin capital wasn’t immediately available, critics quickly pointed out that parent General Motors pulled the Chevrolet brand out of Europe in 2013 in order to continue focusing on its Opel/Vauxhall subsidiary. Then, last year, GM sold that German-based operation to its French rival, the PSA Group.
“It doesn’t make any sense,” Maryann Keller, a long-time automotive analyst and author of a series of books on General Motors, told Bloomberg. “What he’s saying is not validated history.”
Ironically, Trump has also faulted General Motors – as well as its cross-town rival Ford Motor Co. – for both importing foreign-made cars and shipping vehicle production and jobs out of the U.S. During the campaign, in fact, the president threatened to hit both those makers, with hefty tariffs.
At last week’s rally, however, much of his wrath was focused on European automakers.
During a spring meeting with French president Emanuel Macron, Trump reportedly threatened to take steps that would effectively ban Mercedes-Benz products from New York City and, by implication, from the rest of the U.S.. In May, he threatened to take broader action, ordering Commerce Secretary Wilbur Ross to begin an investigation into whether foreign-made vehicles posed a threat to national security.
"We're going to put a 25 percent tax on every car that comes into the United States from the European Union," Trump said in West Virginia, repeating the earlier pledge.
The problem is that the Commerce Dept. investigation is far from complete. Indeed, it’s becoming a question of when, and perhaps even if, the probe will be completed. According to the Wall Street Journal, Ross strongly indicated the end-August deadline won’t be met and, in an interview, the Commerce chief wouldn’t set a new timeline, indicating the probe has been delayed by ongoing trade talks with Canada, Mexico and the European Union.
Detroit automakers have, over the years, complained about unfair trade tactics that they felt made it difficult to sell American-made vehicles abroad while making it easy for foreign competitors to access the lucrative U.S. market. But the auto industry has put up a generally uniform front opposing proposed tariffs that, industry experts have warned, could drive up vehicle prices while driving down sales. During a Commerce hearing last month, the United Auto Workers Union was the only industry group to speak out in favor of new trade restraints.
Several foreign officials, including German Chancellor Angela Merkel, as well as some European automakers like Volvo, have raised the prospect of eliminating automotive tariffs entirely. Some experts, such as David Cole, director-emeritus of the Center for Automotive Research, have warned new tariffs could devastate Detroit’s Big Three. They make almost all their profits on pickups which are largely protected from import competition by the “chicken tax,” a 25 percent tariff on foreign-made trucks. Eliminating that barrier could lead to more competition and sharp price cutting, said Cole.
Industry officials have also expressed frustration that the steps the White House has already taken in its trade war with China are having quite the opposite effect of making American-made vehicles more affordable in that market. Chinese Premier Xi Jinping earlier this year laid out a plant to sharply reduce that country’s 25 percent auto import tariff but, instead, the latest round of new tit-for-tat tariffs adds an additional 25 percent in duties on American-made vehicles.
Ford Motor Co. has already said it will have to cut production of vehicles like the Mustang that were targeted for China. BMW, which is the largest exporter of American-made vehicles, is also studying options that could lead to a reduction in production at its Spartanburg, South Carolina assembly line.