BMW, Ford, Tesla brace for ‘nightmare’ tariff whiplash
For BMW, Tesla and other global automakers whose future is ever more dependent on China’s burgeoning market, any gains from lower import tariffs this week will likely be short-lived — thanks to President Donald Trump’s trade war.
After decades of pleading for easier access to the world’s biggest car market, manufacturers finally saw duties on overseas imports almost halved to 15 percent on Sunday. But the reprieve for producers of those models — if they are built in the U.S.— is set to end in five days, when a retaliatory 25 percent levy makes them more expensive.
Trump’s tit-for-tat trade squabble with China threatens to undo years of lobbying by carmakers and drag Europe’s leading luxury brands into the fray because of decisions that were made when global manufacturing and exporting were buzzwords. Now, the uncertain implications of a tariff whiplash are unnerving dealers and consumers in a country where a record 24 million vehicles were sold last year.
“It is a nightmare to have the 25 percent additional duty,” said Wang Rongzhen, deputy general manager and an investor in Yan’an Jinchi Feike Auto Sales and Service Co. The Yan’an, Shaanxi-based dealership imports models such as Fiat Chrysler’s Jeep from the U.S.
At Shanghai Aote Hung Car Sales, higher tariffs would just be another headache for sales manager Liu Yuanyuan, who says she’s struggling to shift stock as consumers anticipate the typical summer clearance discounts. Her dealership imports models including those from MercedesBenz, Buick and Jaguar Land Rover.
“Most of the clients are waiting,” Liu said. “After the trade war issue, many imported vehicles like Mercedes-Benz or BMW, especially the BMW X4, X5 and X6 manufactured in U.S., are being impacted. We are advertising that clients can buy cars at promised prices before July 6, but there are no guarantees afterward.”
Unless Trump backs down, on July 6 the U.S. will impose tariffs on $34 billion of Chinese imports, many of them parts used in products such as marine engines and power turbines. China will impose countervailing levies the same day — including on U.S.-manufactured cars. The auto tariffs will wipe out the July 1 reduction to 15 percent from 25 percent on all foreign car imports.
On Monday, commodity powerhouse Australia delivered a warning that rising trade protectionism will hurt global growth, adding its voice to a chorus of alarm.
China’s retaliatory tariffs couldn’t have come at a worse time for foreign luxury-car makers. The depreciating yuan is already making imported vehicles more expensive for local buyers. Chinese equities have entered a bear market, further eroding domestic buying power.
“U.S. carmakers may need to brace for seeing their market share encroached as consumers increasingly favor domestic brands,” said Liu Yuanchun, a professor at the National Academy of Development and Strategy at Beijing-based Renmin University of China.
The additional levies could trigger even more retaliatory measures. Trump last month instructed trade officials to identify $200 billion in Chinese imports for additional tariffs of 10 percent, and said the U.S. would impose duties on another $200 billion if Beijing retaliates. China vowed to hit back.