The atomic sledgehammer that President Trump just delivered to the German auto industry simply cannot be overemphasized. A 25% tariff on imported cars and car parts completely negates hundreds of billions in pre-positioned investment dollars by German auto companies in Mexico. [Executive Order Here]
To give scale to the impact on Germany, consider that German automakers currently have 330 automotive suppliers in Mexico according to information from VDA. Audi (a subsidiary of Volkswagen) has no U.S. production sites; every Audi sold in America will be subject to a 25% tariff. The Audi brand access to the U.S. market was/is 100% dependent on Mexico, including for manufacturing the Q5 SUV, its top-selling U.S. model.
According to prior reporting from Politico, “Volkswagen’s most popular model for American consumers is the Tiguan, an SUV that is entirely manufactured in Mexico. The German automaker sold over 30,000 of the vehicles in the final quarter of last year, a nearly 50 percent year-over-year increase.” But wait, it gets worse….
French-Italian-American automaker Stellantis is the most exposed of Europe’s automakers as it makes Jeep and RAM models in Mexico.
The tariffs will make European automakers’ Mexican factories completely redundant. They could make them in Germany for the same tariff impact. Making them in Mexico is now useless. They were only being made/assembled in Mexico to gain access to the U.S. market without tariffs.
This reality will push all EU automakers to shift production to the U.S. There could also be an explosion in UAW membership depending on where in the USA the EU car companies end up manufacturing.
The auto industry is only one industry, but it is a huge economic driver for multiple countries, especially those countries who depend on access to the U.S. market in order to sell their cars and trucks.
German automakers will need three things, quickly: (1) Subsidies from German govt to help offset the impact of tariffs [Short term 2-5 years]. (2) Shift production of autos for U.S market into USA [Make in USA]. (3) Interim access to new markets to help offset the anticipated drop in demand [think Russia without sanctions]. Each of these facets plays into current geopolitics.
That’s mainly just the German impact. Then overlay Canada and Mexico (big impact), along with South Korea and Japan (lesser impact due to pre-positioned manufacturing/assembly in the USA). The auto-tariffs carry a huge economic outcome around the globe.
[Source]
Europe – “European Commission President Ursula von der Leyen responded quickly to a decision by United States President Donald Trump to slap a 25 percent tariff on auto imports.
The tariffs, which Trump said will take effect April 3, are a heavy blow for the European car industry and represent the largest escalation yet in Trump’s multi-fronted trade war, which is expected to have severe global economic consequences.
“I deeply regret the US decision to impose tariffs on European automotive exports,” von der Leyen said in a statement released late Wednesday evening. “Tariffs are taxes — bad for businesses [and] worse for consumers equally in the US and the European Union.”
She said Europe would assess the tariffs, and anticipated that further measures would arrive from the White House in the coming days. Trump has stepped back from implementing tariffs on America’s allies and adversaries several times since his Jan. 20 inauguration.
“We’re signing today,” Trump said of the protectionist tariffs. “It goes into effect April 2. We start collecting on April 3.”
While von der Leyen’s language was guarded, she left little doubt that the EU is prepared to retaliate.
“The EU will continue to seek negotiated solutions, while safeguarding its economic interests,” she said. “As a major trading power and a strong community of 27 Member States, we will jointly protect our workers, businesses and consumers across our European Union.” (More)
The EU, in order to protect Germany, will force the weaker Eastern European countries to indebt themselves in order to pickup the idling cars.
It’s what Germany does best. Take even more control of the EU.
“European Commission President Ursula von der Leyen responded “
I stopped reading there and went immediately to the comments ….
Btw, we were told back in the 90’s, by way of NAFTA, that by shipping jobs outside of the country, that would create economic situations that would drive down illegal immigration and make those countries more prosperous.
Did the .gov lie to us ???
A faster way to create production capacity in the US would be to truck the already built factory from Mexico. The lines are built, they can be moved to another location further north. No tariffs, access to the US market. It takes a long time to build a line, but the equipment already exists just down the road. The private sector can move more quickly than the public sector, and more effectively.
The FREE RIDE is OVER!
Mommy, Orange man is being mean to me.
This is all part of the economic attack against the globlaist multinationals content with taking our money for low quality products sold at a premium price, a friend has q5 needs a new tranny, 19k to replace 8 weeks to order and receive. It’s more than the value of the vehicle. Level the playing field.
Dang! There’s a Eurocrat saying taxes are bad.
Toyota products are much better. Have had several Toyota products and all drove well. One old station wagon went to 250 000 kms and was still going strong
This is 4D chess and too many of you fools are still acting like this is some kind of pickup game up in Rochester. Germany impacts, Mexico. The dominoes will start to fall and the cash will flow. Stop thinking with your 401k’s and get in the boat and row.
I love your point about the impact on geopolitics.
Germany needs money to subsidize its auto industry (so, needs to stop blowing it on Ukraine and “migrants”) and it needs normalized relations with Russia in order to sell cars to them.
More pressure to end the war. Brilliant.
We don’t need Germany’s junky, overpriced cars anyway.
”European” means German.
WINNING!
And I’m ot getting tired of it yet!
I don’t think I ever will! I ,managed a VW Dealership for years….now retired…..this will impact them hugely! And…..force change into America!
In any event, Germany is again commiting national economic, ethnic, spiritual and demographic suicide at home.
The entire EU for that matter. With a couple of exceptions. Romania tried to vote for a man who believes in Romania 1st, but the EU ordered him arrested.
We must end our membership in NATO, and withdraw our military from Ukraine, Europe, Pacific and Africa now.
We can’t afford to subsidize the large corporations’ operations overseas and we need our boys on our borders.
“Tariffs are taxes — bad for businesses [and] worse for consumers ” yet they are not discussing their high tariffs on American goods or worse yet, the ban on certain USA products