German automakers propose to abolish EU-US tariffs

German carmakers wants the EU to scrap its 10 percent tax on imported US-made cars, the Wall Street Journal reported.

According to the newspaper, during their recent meetings with the US Ambassador to Germany, Richard Grenell, top executives of leading German automakers BMW, Volkswagen and Daimler Benz pitched the idea of scrapping mutual car import levies as part of a broader agreement on a wide range of industrial goods.

Moreover, Europe reportedly wants a 25 percent tax on imported pickup trucks, SUVs and big vans, in effect since the 1960s, to also be scrapped as part of a broader deal including a wide range of industrial goods.
This presents a problem for the Trump Administration, however, because lifting the Lyndon Johnson-era levy could alienate US auto workers who form a significant part of Donald Trump’s support base at home.

The European Commission earlier threatened to impose a 25 percent tax on $3.2 billion worth of US goods, after President Trump announced a 25 percent tariff on imported steel from the EU and a 10 percent tax on aluminum imports from the bloc.

Tensions between the US and its key trade partners in the world have been increasing fears of an all-out trade war.

German car makers’ efforts face significant hurdles. Berlin has no power to hammer out trade deals—a prerogative of the European Commission, the EU’s executive body in Brussels—and would have to persuade fellow EU member states, starting with France, to back a radical free-trade approach many have shown little interest in.

The car makers’ approach is unusual, but German officials said any approach could be worthwhile to try to sway a president whose actions have left his allies perplexed at best.

“Germany has the right approach to resolving this trade disagreement among friends,” said U.S. Commerce Secretary Wilbur Ross. “If the EU were to reduce its 10% tariff on U.S. cars and trucks, that would be a positive first step toward trade that was more fair and reciprocal.”

Daimler and BMW each generated around 10% of their global unit sales in the first five months of the year through exports to the U.S., according to Wall Street Journal calculations.

“If these tariffs are imposed my BMW, Audi and Porsche dealerships will become warehouses and cease to exist. The math just doesn’t work,” says Steve Kalafer, a founding chairman of the New Jersey-based dealer network Flemington Car & Truck Country Family of Brands.

The Commerce Department is preparing a study to determine if tariffs could be imposed on national security grounds. Stormy-Annika Mildner, a foreign trade expert at the Federation of German Industries, said German industry groups would submit comment to Commerce this week to object to the notion that Germany poses a security threat.

She said German auto companies support thousands of jobs in the U.S., and that exports from German auto factories contribute positively to the U.S. trade balance, and German companies have been active in training American workers.

“Any deal has to be reciprocal,” Ms. Mildner said. “Europe lowering car tariffs on a unilateral basis would not be a clever thing to do.”