US threat of tax on EU cars affects German car industry

US threat of tax on EU cars affects German car industry

German carmaker BMW’s shares fell by 1.17 per cent on Monday after US President Donald Trump threatened to impose taxes on cars made in the European Union.

After a slow start, Daimler’s stocks were only slightly down, whereas Volkswagen made gains, but overall, the European car industry lagged behind on the markets.

After Trump announced his plans to impose punitive tariffs on imports of steel and aluminium, he threatened the European Union with taxes on cars made in the bloc, a move that has spooked one of Germany’s most important industries.

Industry representatives warned against starting a trade war, stressing that the German car industry was an important player in the US economy.

Fears of punitive tariffs on European cars are nothing new, but they are a big risk for German carmakers, even if net imports from the United States have gone down significantly in recent years, one industry tradesman said on Monday.

If the tariffs do not affect cars and parts manufactured in Mexico, then BMW would be the most affected by the tariffs, because they export a comparatively large proportion of their cars to the US.

The only BMW-models produced in the US are their SUV X models, which are manufactured at BMW’s Spartanburg plant in South Carolina.

According to industry analyst Arndt Ellinghorst from Evercore ISI, BMW is the most at risk amongst carmakers, with Daimler being a close second. Volkswagen will probably be the least affected, seeing as most of their profits aren’t reliant on their business with the US.

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