This is one of those reports that seems small and appears way over there on the periphery. However, if MAGAnomics and trade are important to you, this story is very much worth paying attention to.
As CTH shared last week the White House reached out to EU auto executives to request a meeting. There is a VERY STRONG likelihood the message within this meeting will surround potential tariffs, and questions from team Trump about the intents of EU (mostly German) automakers against the backdrop of the USMCA.
The potential for auto-tariffs terrifies the EU (specifically Germany), because most of their profits from within the industry come from access to the U.S. market. Few major markets in the world can afford the scale of automobile purchases as a wealthy U.S.A. does. The profit margins are much smaller in all other countries. Without the U.S. market, these auto companies would be in deep financial trouble. Enter Trump’s leverage:
BERLIN (Reuters) – Top executives from German carmakers Volkswagen, BMW and Daimler are finalizing plans for a White House meeting on trade policy next week, German and U.S. officials said on Thursday.
Officials from the carmakers, asking not to be named, said the meeting was tentatively set for Tuesday, and would include VW Chief Executive Herbert Diess, Daimler CEO Dieter Zetsche and BMW production chief Oliver Zipse.
President Donald Trump has been harshly critical of German automakers and what he sees as an unfair trade imbalance on autos.
He has threatened for months to impose tariffs on vehicles assembled in the EU, a move that could upend the industry’s business model for selling cars in the United States.
However, he has refrained from such a measure while Washington and Brussels undertake talks to cut other trade barriers.
The CEOs plan to make clear they cannot negotiate on behalf of the EU, people close to the matter said last week. (read more)
I love that last line: “CEOs plan to make clear they cannot negotiate on behalf of the EU“, that’s funny; and the best part is Trump knows exactly the silliness of that statement. Whatever the German auto-sector demands, the EU delivers – P.E.R.I.O.D.
But seriously, the primary question for the U.S. team revolves around seeking to understand how the EU companies will comply with the new U.S-Mexico-Canada (USMCA) trade pact to avoid the import tariffs. [Angela Merkel is irrelevant]
The answer is more important to Mexico and the U.S. because no-one is foolish enough to build a manufacturing plant in the left-wing North known as Canada. So POTUS wants to know how the EU is going to comply with the new 75% origination rules within the U.S. and Mexico agreement.
The outcome of the EU answer(s) will likely determine the scale of tariff that President Trump is considering on the entire industry. President Trump is actually constructing a 10/25-year economic ‘business plan‘ for the entire country.
Stay tuned…. this is the fun stuff!