Since Donald Trump has become the new U.S. president he has been vowing to turn American trade policy toward a more protectionist stance. That includes imposing a 35 percent tariff on imported cars, could have far-reaching consequences for European automakers.
European auto executives who gathered here last week for the annual Geneva auto show have found themselves having to deal unexpectedly with trade issues in markets, including Britain and the United States, that just a year ago seemed steady. Many European automakers produce and even export cars from the United States and Mexico, having based their investments on the North American Free Trade Agreement, which Trump has assailed. Last year, BMW exported 70 percent of the X-class crossovers it builds at its plant in Spartanburg, S.C., which produced 411,171 vehicles in 2016. If Trump is able to enact higher tariffs, or renegotiate NAFTA, automakers would face a number of difficult choices. NAFTA governs commerce with Mexico and Canada.
Automakers could pass some of the extra costs on to consumers or try to readjust their production mix, reducing exports to and from the U.S., to avoid the levies. In another scenario, the tariffs would set off a trade war, theoretically raising the possibility that European car companies would have to pay duties on cars they build in the United States for export back to Europe. The companies are saying, we'll deal with it, but there's going to be a cost involved.
