German Auto Companies Sign Manufacturing Deal With China…

It is more than likely President Trump and Commerce Secretary Wilbur Ross knew this was in the making several months ago.  In hindsight it now appears Germany presented a false proposal to U.S. Ambassador Richard Grenell intentionally to poke him in the eye.

Germany has sealed the fate of their auto-industry with a multi-company agreement to manufacture vehicles in China and share all their intellectual processes therein.

FRANKFURT (Reuters) – German companies signed a series of agreements with Chinese partners at a meeting of Chancellor Angela Merkel and Prime Minister Li Keqiang in Berlin on Monday, according to a document seen by Reuters. Following are details of them:

♦BASF signed a Memorandum of Understanding (MoU) with China’s Guangdong Province to look at building a highly-integrated chemical production site there, BASF said.

♦[…]  BMW and its joint venture partner Brilliance Automotive Group Holdings (1114.HK) have agreed to expand production capacity at BMW Brilliance Automotive’s two sites in China to a total of 520,000 BMW brand vehicles in 2019, BMW said.  In addition, it said the two companies had agreed that the all-electric BMW iX3 would be exported from China to other markets.

♦[…] Bosch and Chinese electric vehicle startup NIO agreed to cooperate on sensor technology, automated driving, electric motor controls and intelligent transport systems.

♦[…] Volkswagen said its Spanish brand SEAT would return to the Chinese market in 2020/21 as part of an agreement with China’s Anhui Jianghuai Automobile Group (JAC) (600418.SS) to develop electric vehicles.  VW, SEAT and JAC will jointly set up a new research and development center in China to develop electric cars as well as technologies for connectivity and autonomous driving, it said.  (read more)

On its face this seems like a poor decision on the part of Germany, however within multinational trade constructs the alignments are a heavy blend of the political and the financial.   Germany is aligning their interests ideologically with China and as a consequence they will likely see ZERO benefit in any trade negotiation with the U.S.

Chancellor Merkel is taking a gamble here, because China is aligning with Iran in the energy sector; and as an extended consequence Merkel’s auto industry will likely face 20% import tariffs from the U.S.

Chinese built BMWs will likely not hold much appeal in the U.S; and the structure of this German-China deal has downstream ramifications making the U.S. exit from NAFTA more urgent; thereby cutting off the workaround the EU -specifically BMW- was counting on from the new Mexican auto plant set to begin production next year.

Immediately following the 2016 election (December), President Trump warned BMW (and others) about opening a manufacturing plant in Mexico; Trump suggested such a decision might backfire.  BMW ignored the warning and contracted with Mexico for an auto plant with intentions to use NAFTA to bring the completed cars to market.

The plant is anticipated to be operational in 2019; however, it is now increasingly likely that NAFTA will be dissolved and President Trump is threatening a 20% auto-tariff to any imported cars.

BMW was planning on using the NAFTA loophole to assemble EU auto parts in Mexico for duty-free transport into the U.S.   However, now there’s a likelihood the BMW sedans planned to be built in Mexico could be subject to U.S. tariffs and they cannot gain benefit from the NAFTA loophole.

BMW builds SUVs in Spartanburg, South Carolina.  The reason they build them there is due to a 25% pre-Trump existing tariff on imported SUV’s.   It looks like BMW made a bad decision to build an car plant in Mexico; although their position as expressed within the Reuters article fails to mention this aspect at all.   Obviously they don’t mention the 2016 warning from President-Elect Trump either.

The alliances will not end well for the EU.  This is a perfect opportunity for President Trump to push a bilateral trade deal with the U.K…. but British political leadership is too stupid to see the opportunity.

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This entry was posted in Big Government, Big Stupid Government, China, Donald Trump, Economy, Election 2018, European Union, Iran, Japan, media bias, President Trump, Trade Deal, Transportation, Uncategorized, US Treasury, USA. Bookmark the permalink.

405 Responses to German Auto Companies Sign Manufacturing Deal With China…

  1. Garrison Hall says:

    I’ve had this idea for quite a long time now. We have the energy resources, natural resources, food production infrastructure, population base, and a large enough marketplace. The US could easily completely separate itself from the world marketplace and go it alone.

    Liked by 3 people

    • Maquis says:

      Put impenetrable walls around every country of the world and 100 years on most wouldn’t even exist anymore, yet we’d be thriving.

      Liked by 1 person

    • louche9 says:

      That idea has been batted about. I remember an Economist article directly after 9/11, fretting about the possibility that the U.S. would be tempted to close itself off after such a shocking attack. It brought up the fact that “fortress America” was viable for the States, but would be deleterious to the rest of the world. I must admit that I’m increasingly thinking, “Tough.” As I’ve read somewhere, our business relationships with the world always seem to involve us tying our hands behind our backs and hobbling ourselves, so that the other losers have a chance, and what we’ve largely gotten for that largesse is the world’s collective middle finger.

      Like

  2. Lawrence D'Alonzo says:

    So now lets pull our troops out of Germany and China can now protect them with their troops and money, and soon they will take over Germany. Good job Merkel

    Liked by 2 people

    • Bill says:

      Pull our troops from NATO AND let the Germans, Europe and Chinese defend their oil and maritime interests with their own navies…

      What Somali pirates?
      US domestic oil production hit 10.9 Million barrels/oil/day production in the last week of June. Energy independence in 2020!

      Liked by 2 people

    • SSI01 says:

      Now THERE’s a thought!

      Europe really knows how to show gratitude, doesn’t it?

      Twice we save every other country in Europe, but Germany. On the other hand, the Germans had a form of democracy for a while until it lapsed. Granted there were extenuating circumstances – like the Great Depression – but other countries in this world weathered that problem without building a massive military and then inflicting it on their neighbors. All except one, in the Pacific, and another half-experiment in the Med. So then we come over to Europe, against our will, and within the space of 25 years we have to deal with the Germans again, only this time in a more permanent fashion. And this is how the continent remembers us.

      We need to leave at least Germany permanently, and when I say “leave,” I mean leave the way we left France when it asked us to leave under DeGaulle. We even removed the light bulbs and the plumbing fixtures from buildings we left behind. The rest of NATO will get the message when we repeat that little exercise.

      France had its fit of pique under DeGaulle – but after his passing the French military, while still not a part of NATO, now exercises with NATO AND US FORCES regularly as well. Their being “out of NATO” is an administrative sham.

      Like

  3. cali says:

    From what I understand president has asked the Pentagon about withdrawing our soldiers from
    Germany. Since Germany has been piggy banking ‘free’ defense by our Armed Forces stationed all over Germany while Germany did not hold up their agreement to pay the 2% contribution.

    Yet Merkel had enough welfare benefits available for her import of 1.5 million muslims providing them free housing, healthcare, food, education and more.

    In hindsight of Merkel’s backstabbing theatrics with the Iran deal having laundered Hussein’s pallets of cash to receive her kickback every 6 months = 186 million per year, making deals behind the presidents back to avoid sanctions to keep up the deals made with Iran and now this? Really Merkel you dumb and vindictive woman? What a dense woman!

    Take into consideration the assistance and role Germany’s deep state played cooking up and framing president Trump with HRC, Strzok and host of others I’d say Germany’s time is up.

    Together in sum its not worth to continue on the trajectory – cut ’em loose Mr. President because Germany is not fair or honest in anything they do. Let them provide their own defense and bring our troops home. In the past these men and women were nothing but a economic resource for Germany and provided a jobs market for Germans in the thousands.

    Liked by 2 people

  4. SSI01 says:

    Folks, we have a HUGE BMW import facility here, many thousands of cars all over the lots there waiting to be put into railroad cars and shipped who-knows-where. I guarantee you when either Chinese-built BMW cars, or BMWs with Chinese parts in them, start showing up there and then begin failing in their owner’s hands – well, maybe that lot won’t have many cars there – or it will be filled to bursting with unsold vehicles. This augurs nothing good at all for either BMW or Germany.

    BTW I just came from another site where a British tabloid ran a story about German troops carrying black-painted broomsticks while on maneuvers some time ago. Poor-mouthing about not enough money for weapons, making this known just before Trump shows up for the big NATO ministers’ meeting. I guarantee you a quick look at the German budget’s spending priorities would show us why those “landsers” are running around with broomsticks – all that money that could be spent on German armaments for their troops is going instead for social programs, probably most if not all to handle the rapid influx – no, invasion – by “illegal immigrants.” I hope Trump’s staff has done their homework and has their charts, graphs and intel ready when those conferences start.

    Liked by 4 people

    • SSI01 says:

      BTW most of us in this country already know this because we were here through the 80s and 90s when Slick Willie cut the military back so badly – and then through the Obama years when this same thing happened again. Germany can’t pull the wool over our eyes, because we’ve been through this same thing twice with our military in the past 20 years.

      Liked by 1 person

      • Maquis says:

        Bush 41 began the “Cold War Drawdown” before Bubba was passed the bong. Darth Cheney was his Secretary of Defense, and I cursed him whilst in uniform.

        Like

        • SSI01 says:

          I can remember how roundly our agency director was cursed by the rank and file. Every time another incremental cut was announced he was first in front of the microphone telling everyone how we were among the first in the Navy to comply. We, all of us, would have thought more of him if he had been dragged before some committee, kicking and screaming, about how he just could not afford to cut any more. Our agency, a part of DOD (which bore most of the cuts under Bill Clinton), had a six-year gap in hiring, which led in turn to a huge gap in the ranks when those folks – myself included – who reached mandatory retirement age HAD to go in the early-mid 2000s. We had no funds for training, and trips to complete lead work were severely curtailed. Result? Many investigations that could have been completed in a few weeks took months or in some cases years to wrap up. And our director was among the first telling everyone how proud he was of our agency for being among the first to comply with our illustrious president’s directives.

          Like

  5. signreader says:

    One thing that didn’t make sense, America rebuilding Germany and letting it get reunited! Remember doing campaign Trump used to tell the story of old woman and frozen snake…He sure has a snake pit that is EU under commrade Merkel!
    He will be busy for a while with snakes here in the US and the rest of the world! Most of the former POTUSs been globalists in last half a dozen decades! PDJT just tell Tusk/ Merkel that $150 billion trade delta would be adjusted toward 2% share of GDP shortfalls they can figure that among themselves! It will be such a thing of beauty to watch if PDJT does that!

    Like

    • SSI01 says:

      Henry Morgenthau, SecTreas under Roosevelt, wanted the placed plowed under and returned to pastureland. I think he may have mused on that until the death camps were revealed, and he became serious about it.

      Like

  6. Sa-teef says:

    Merkel and her globalists have just laid a big one. Tens of thousands of good paying German auto industry jobs will find their way to China. And we will see massive transfers of technology and the destruction of hard earned German automotive respect.
    My son drives an Audi and my daughter’s husband drives a Merc. No way they will EVER buy a Chinese built car for the prices they must pay.
    My brother has built a very successful chemical business mitigating the problems government and business encounters with poor quality Chinese steel. Yes, it looks fine at first; Chinese are good with appearance and the superficial, but the quality control is awful and they cheat at everything. Their steel will meet the standards usually or the inspectors are paid off. But they help write the standards and in the long term there is corrosion, discoloration and sometimes failures. Their so-called high quality steels and alloys are positively the worst! Particularly in a salt water environment all they can do ultimately is replace it …..with good quality German or American steel.
    The globalists are so gung-ho about making it a single planet with a single market but they haven’t the vision to see what folly it is following this path.

    Liked by 2 people

    • SSI01 says:

      I made the mistake of pointing this out to a higher-ranking DOD personality in a meeting one day. That’s all I can safely tell anyone. Result: folks were at my directorate the following Monday morning calling for my head.

      Like

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