German carmakers to have White House talks on tariffs

US threatening to impose heavy duties on European vehicles

Volkswagen cars being readied for delivery.

Volkswagen cars being readied for delivery.

 

The bosses of Germany’s three largest carmakers will meet senior US officials on Tuesday to try to ease tension with Washington over trade, with President Donald Trump threatening to impose swingeing import tariffs on European vehicles.

Chief executives from BMW, Daimler and Volkswagen will hold direct talks in the US with commerce secretary Wilbur Ross and Robert Lighthizer, Mr Trump’s top trade official.

Larry Kudlow, the president’s chief economic adviser, said the focus would be the companies’ investment into the US and their use of US-made engines. A person briefed on the automakers’ preparations for the meeting said the aim was “above all to try to calm down the atmosphere”.

Blow

The threat of US import tariffs- which would be a body blow for German carmakers - has hung over the European car industry since May, when Mr Trump launched a national security investigation into vehicle imports.

If the Commerce Department’s probe concludes that such imports are indeed a threat to national security, Mr Trump will have to decide whether to press ahead with the tariffs.

A flurry of recent presidential tweets has suggested that he might be preparing to pull the trigger, despite warnings from business of the economic damage such levies could inflict.

The tweets came in the aftermath of General Motors’ announcement last week of sweeping job cuts and plant closures in the US. Last Wednesday, Mr Trump said the 25 per cent tariff imposed on imported pick-up trucks and commercial vans from markets outside North America in the 1960s had given a big boost to US vehicle production.

He said that if the US “did that with cars coming in, many more cars would be built here . . .and G.M. would not be closing their plants in Ohio, Michigan & Maryland”.

“The countries that send us cars have taken advantage of the US for decades,” he went on. “The president has great power on this issue - Because of the G.M. event, it is being studied now.”

Threat

In a briefing with reporters on Monday, Mr Kudlow played down the possibility that Mr Trump would make good on his threat. “I know there has been talk, but I don’t think this meeting [with the German chief executives], or anything else for that matter right now, is moving towards car tariffs,” he said. “The president has said it is in his quiver of arrows sure, but none of that is changed, it is not worse or better, anything.”

The discussions with the German carmakers would cover topics including “our hope that they will continue to invest directly in the US”. But he added: “Please don’t make any assumptions on auto tariffs - yes or no. That is not what this is about.”

The meeting, which was largely instigated by Richard Grenell, the US ambassador to Germany, has caused irritation in Berlin and Brussels, which conducts trade talks for EU member states.

“We have to be clear about this – it is the European Commission which has sole responsibility for trade negotiations, not national governments, and certainly not car companies,” said Steffen Seibert, spokesman for chancellor Angela Merkel on Monday, when asked about the meeting.

The issue of car tariffs came up at the G20 summit in Buenos Aires. In his closing press conference, Emmanuel Macron, the French president, said he and Ms Merkel had raised the topic with Mr Trump at a gala dinner.

Plans

But Mr Macron said that based on his experiences with the US president, he would be very cautious about claiming that they had “convinced” Mr Trump.

The meeting meeting will include Dieter Zetsche, head of Daimler, Herbert Diess, chief executive of Volkswagen, and Harald Krüger, BMW’s chief.

German carmakers have responded to the threatening noises from the White House by emphasising their commitment to the US market. BMW last week said it was considering building an engine plant in the US to supply BMW vehicles manufactured in the US and Mexico.

VW also said it was planning to build a factory in the US to make electric cars while Daimler has said it will invest $1 billion (€880 million ) in its SUV plant in Alabama.

Despite the nervousness, there was relief in Germany over the weekend after Mr Trump suspended his decision to impose higher tariffs on Chinese imports next year. Any trade war between Washington and Beijing would have affected German cars that are built in the US for export to China.

– Copyright The Financial Times Limited 2018