European commissioner: we will react to US auto trade tariff

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Currently, the US charges just 2.5% on car imports; this is lower than the EU’s 10% and China's 25%, although the latter will lower its tariff to 15% from 1 July. Trump had previously described China’s unusually high import tariff as “stupid trade”.

Although a large portion of the US’s most popular car models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from outside the country. Most come from Asia, but several European brands, including Land Rover, don’t have US factories.

The US is the largest export market for cars built in the EU. Last year, £171 billion worth of cars were exported from the EU, with the US accounting for 25%. Of those, just over half were exported by German car makers.

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Leaders in China and South Korea have already said they will monitor the situation closely and react accordingly to protect the interests of brands in their countries.

Although China is the world’s largest new car market, with 23.9 million vehicles sold there last year, the US remains a core focus for most global brands. In 2017, 17.2m vehicles were sold in the US, compared with 15.6m in the EU and European Free Trade Association countries.

Felipe Munoz, global analyst at JATO Dynamics, said: “While German-made cars accounted for 4% of Q1 18 US sales, American-made cars made only 1.3% of German registrations in the first quarter. Most of the units imported from Germany are premium cars, which tells a lot about the position of American car industry in the premium market. Germans are the world’s leaders in the premium market as they hit before American and Japanese cars, and have been evolving fast, with large ranges of products.

“Any attempt to increase taxes on German cars would have a larger effect on BMW and Mercedes, and a lower effect on Volkswagen, as most of the sales of the premium brands correspond to imported models (63% for Mercedes and 64% for BMW). It would also hurt the operations of Porsche, which imports all of its cars from Germany. If the trade conditions get tough for German imported cars, this would have a bigger effect on sedans and sport cars, which are the largest part of their imports. As these segments don’t grow anymore, both BMW and Mercedes could consider axing some of the models or increase local production of SUVs.”