The increased tariff could mean a $5.24 billion loss for German manufacturers, say analysts at Evercore. And besides increased taxes for exporting to the U.S. foreign car makers will need to pay higher taxes for importing steel from the U.S. This is a result of reactionary trade agreements. As one country raises tariffs on some goods, the next country reacts in kind by raising tariffs of their own.
Switching Production to American Facilities
Some European companies could produce their luxury models in U.S.-held facilities. Volkswagen, Daimler, and BMW all have American-run factories. But they don’t produce luxury models. These companies use their American plants to produce sedans, SUVs, and crossovers for the wider market. It would be expensive to switch or expand operations to make luxury models.
Increasing tariffs and the looming global trade war could cause some companies to invest in more flexible facilities.
Balancing the Books
The increased tariff might not affect car manufacturers as much as some think. LMC Automotive reports that sales for convertibles in the U.S. are already falling. In 2012, Americans bought 177,000 convertibles. In 2017, they only bought 127,000. They believe that trend would continue to Americans only buying 113,000 convertibles in 2019 if tariffs remain the same.
