German carmakers join American farmers on front line of US-China trade war

WASHINGTON/FRANKFURT/ BEIJING: An increasingly shrill exchange of words between the United States and China that is threatening to trigger a global trade war has claimed another victim – Germany’s auto sector.

Luxury carmakers Daimler and BMW joined American farmers and Chinese solar panel and steel makers among the first casualties in what looks set to become a bitter trade war on a global scale of a kind not seen since the 1930s.

While most economists believe a tariff war between the world’s two largest economies will not derail global growth even if US President Donald Trump follows through with duties on US$450 billion of imports from China, individual industries such as agriculture, autos and technology look set to be hit hard.

Daimler on Wednesday cut its 2018 profit forecast while BMW, whose Spartanburg, South Carolina plant is the largest single exporter of vehicles in the United States, said it was looking at ‘strategic options’ because of the threatened trade war.

The first test of whether a tariff war will indeed start comes on July 6, the date on which Trump has threatened to enact the first portion of duties on a planned US$50 billion of imports from China.

Beijing has pledged retaliation and Trump has threatened to push harder in response, saying that there could be tariffs on up to US$450 billion of imports from China, close to the US$500 billion of goods the United States gets from the world’s second largest economy.

A trade war between the United States, which is mired in battles with allies in Europe and North America over trade, immigration and foreign policy, and China, the world’s emerging economic and military power, now looks as if it will involve the entire world if both sides follow through on their threats.

“It is deeply regrettable that the US has been capricious, escalated the tensions, and provoked a trade war,” Chinese Commerce Ministry spokesman Gao Feng said on Thursday.

“The US is accustomed to holding ‘big sticks’ for negotiations, but this approach does not apply to China.”

At the same time as Gao and Chinese newspapers stressed that Beijing would strike back, President Xi Jinping told foreign company executives in Beijing that he was pressing ahead with promised tariff reductions promised in April. — Reuters