No deal on auto tariffs as White House backpedals, Volvo threatens to move jobs overseas
But with tariffs at 40 percent, analysts have measured a sharp slowdown in demand for American-made vehicles.
“We … thought Charleston could build cars for China,” Volvo’s global CEO Hakan Samuelsson told USA Today during an interview at the Los Angeles Auto Show last week. “That will not work,” Samuelsson added, noting that Volvo would consider shifting some production from Charleston to China, impacting production levels and hiring at the plant.
Other automakers could follow.
Industry officials continue to hope for a quick settlement, but the fast retreat from Trump’s earlier statements isn’t offering them encouragement.
“It doesn’t seem like anything was actually agreed to at the dinner and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality,” said an investor note issued by JPMorgan.
Discerning what is real right now isn’t easy. Trump’s National Economic Council advisor Larry Kudlow tried to strike an update note while acknowledging to Fox News a deal “hasn’t been signed and sealed and delivered yet.”
The president himself offered what could, at best, be called a confusing attempt at clarification. His tweets on Tuesday said: “The negotiations with China have already started,” and he added that his White House team will be “seeing whether or not a REAL deal with China is actually possible. If it is, we will get it done.”
He concluded by describing himself as a “Tariff Man,” adding that the U.S. is “now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN.”
Perhaps, but the auto industry, in particular, has been hard hit by the Chinese trade war and tariffs on imported aluminum and steel. The latter duties will cost General Motors and Ford about $1 billion each, the companies now estimate. Lower exports to China will further strain their balance sheets.
Trump, meanwhile, last week signaled he is still itching to open up a third front in his global trade war, urging Congress to support what could be up to 25 percent tariffs on vehicles imported from other trade partners, such as Germany. Leaders of the European Union have signaled they would echo the response of China, saddling U.S.-made vehicles with new tariffs in response.
European auto industry leaders met with the president on Tuesday, and the White House issued a statement saying, Trump “shared his vision of all automakers producing in the United States and creating a more friendly business environment.”
In fact, European automakers have rapidly expanded their manufacturing base in the U.S. in recent years. That includes not only the new Volvo plant but also at the BMW Spartanburg facility and Daimler AG’s Mercedes-Benz factory in Vance, Alabama.
BMW said it employs 10,000 people at its Spartanburg plant and has plans to hire 1,000 more by 2021.
“Free trade has made the success story of BMW in the US possible,” the company said in a statement Tuesday, adding that 70 percent of the cars made in Spartanburg last year were exported to more than 120 countries. China was the No. 1 destination followed by the company’s home country Germany. The company said it wants to ramp up production in North America and is considering — although hasn’t yet decided — whether to set up a second plant in the U.S. to make power trains.
The stock market pulled back Tuesday with the Dow falling by as much as 800 points after an initial surge, reflecting Trump’s misdirection on trade talks. General Motors, which not only exports some models to China but also imports the Chinese-made Envision SUV, fell 5 percent to $36.52 a share. Ford slid 4.4 percent to $9.18 a share. Toyota dropped 1.72 percent to $120.88 a share. Markets were closed Wednesday, the national day of mourning for President George H.W. Bush.
One of the few automotive stocks to score a gain on Tuesday was Tesla ,which only recently began work on a new factory in Shanghai that eventually will let it sidestep the tariff battle. The California-based electric vehicle manufacturer was one of the few automakers that didn’t fall, closing up by less than 1 percent to $359.70 a share.