President Donald Trump’s plan to impose tariffs on imports of steel and aluminum to the United States has sparked fears of a global trade war. Those fears heightened when European Commission president Jean-Claude Juncker reacted angrily to the announcement from the White House, promising to impose retaliatory tariffs on jeans, bourbon, and Harley-Davidson motorcycles. “We can also do stupid,” Juncker said of the plans. Trump responded by threatening to slap a 25-percent duty on vehicles imported from the European Union.
The U.S. is the biggest single export market for EU automakers, accounting for about 1 million units, about 15 percent of the industry’s total exports, in 2016. Those vehicles are currently subject to an import duty of 2.5 percent. An increase of 25 percent would have a catastrophic impact on European automakers’ sales, revenue, and profitability. Hardest hit would be Germany’s Daimler, BMW, and VW Group, which make 10 to 13 percent of their overall profits from the U.S. market alone.
Trump and a tariff war has been the elephant in the room for many senior auto industry execs at the Geneva show this week. Few wanted to talk on the record about it. FCA and Ferrari boss Sergio Marchionne had no such qualms, however.
Marchionne, who called the EU threats to impose retaliatory tariffs “an unnecessarily childish reaction,” called for calm on all sides. “I think everyone should just be very quiet for a couple of days, recollect their brain cells, and then sit down at the table and argue this thing out intelligently, without letting tempers and rhetoric get in the way.”
One difficulty for European automakers is the tariff arrangement between the U.S. and the EU is not equal. EU-made vehicles sold in the U.S. are charged import duty of 2.5 percent, while U.S.-made vehicles imported into the EU are charged 10 percent duty.
“It is undoubtedly true that Washington has an issue with the trade policy that was put in place by previous administrations,” Marchionne said. “President Trump and his administration are trying to rectify this thing in a way they think protects American interests. You may disagree with that statement, but that’s the view. It’s no use to just ignore it, or threaten retaliation. It won’t work.”
Marchionne wants government and industry to sit down and hammer out a solution to a complicated issue. “People who are involved in NAFTA are finding out that President Trump is dead serious about this. We need to take it seriously.”