COLUMBIA – Reported tough talk against German automotive manufacturers by President Donald Trump could simply be an “opening bid” in trade negotiations, a University of South Carolina economist said.
USC research economist Joey Von Nessen also said Thursday that if the Trump administration follows through with 25-percent tariffs on imported vehicles, it could mean both good news and bad news for the Upstate while posing possible higher prices for consumers.
Scott Baier, a professor and chairman of the economics department at Clemson University, said he does not believe tariffs on imported vehicles would have a direct impact on South Carolina automotive plants, but he said they could indirectly cause higher costs for supplies used by the plants, thus negatively affecting production and employment.
According to a report by German magazine “WirtschaftsWoche,” Trump is preparing to impose a total ban on German luxury carmakers from the U.S. market, USA Today reported Thursday.
Citing several unnamed U.S. and European diplomats, the weekly business magazine reported that Trump told French President Emmanuel Macron last month he would maintain his trade policy with the aim of stopping Mercedes-Benz models from driving down Fifth Avenue in New York. The report didn’t give any further details on what policies would be used to effectively ban the premium carmakers.
The report comes less than two weeks after the U.S. Department of Commerce launched an investigation into automobile imports to determine whether they “threaten to impair the national security” of the U.S., USA Today reported. That could lead to tariffs of up to 25 percent on the same “national security” grounds used to impose metal imports charges in March.
BMW, which operates a massive assembly plant in Greer, declined to comment on the reports, said Kenn Sparks, a spokesman.
Democratic gubernatorial candidate Marguerite Willis issued a statement criticizing any targeting of German automakers by Trump.
“I grew up in Greenville, and BMW saved my hometown,” she said. “Donald Trump’s proposed tariff on German automobiles could cut an artery essential to the Upstate, as well as South Carolina’s overall economy. I think it’s time for Governor McMaster and every South Carolinian to call out Trump for his dangerous, job-killing trade policies.”
Ron Harbour, an automotive industry analyst for the international management consulting firm Oliver Wyman, cast doubt on what the German magazine was reporting or that eventual trade talks would cause any significant impacts at BMW’s South Carolina plant.
“People start stupid rumors like that because they are Trump haters,” he said. “He’ll end up sitting down with the Germans and I’ll guarantee when they are all done it will probably be a similar tariff level in and out between Germany and the U.S., a unilateral agreement he’s after just to get equality. They’ll come up with something that is reasonable.”
Harbour said he doesn’t believe trade officials will take any action that could hurt foreign companies’ plants in the United States becauses there is too much capital investment. He said it is possible that sourcing of vehicles could change, which models are made where, if the tariffs turn out not to be equitable.
“But that doesn’t mean the plant is going to shut down,” he said.
Von Nessen said it’s too early to know for sure what the administration is planning.
“We’ve seen from this administration that these types of statements are better interpreted as opening bids to negotiation rather than a reflection of specific intent,” he said. “It’s purely speculation how this will play out.”
If tariffs on imported vehicles do materialize, he said there will be costs and benefits to South Carolina.
“It has potential to cut both ways,” he said. “On the positive side, we can see benefits to domestic auto producers and possibly even foreign companies that are producing vehicles in the United States already.”
In addition to making vehicles made in the United States more competitive in pricing, Von Nessen said tariffs could also impact a company’s plant location decisions if the cost of exporting to the United States becomes too high.
On the downside, he said, if the European Union or other nations engage in retaliatory tariffs on U.S.-made vehicles exported to their countries, it could impact exports of vehicles manufactured in the United States, particularly in South Carolina, which is heavily dependent on exports.
Consumers also could see higher prices on imported vehicles if tariffs are imposed, Von Nessen said.
“The devil is in the details,” he said.
Baier agreed tariffs would drive up car prices and be “clearly bad for consumers.”
He said they also could impact suppliers in the state.
“Moreover, the uncertainty in trade policies and practices may also impact the willingness to invest in production facilities in the United States,” he said.
Adrienne Fairwell, a spokeswoman for the South Carolina Department of Commerce, said the state will advocate for automobile companies in South Carolina.
“Bottom line, no matter whether it is a German automaker or tariffs on China, at the end of the day, South Carolina is going to do what it has to to help its companies, even if that means the governor of South Carolina going to speak with the president or the administration,” she said.
According to the commerce department, more than 400 automotive-related companies are in South Carolina, providing 66,000 jobs.
South Carolina is No. 1 in the nation in export sales of tires and completed passenger vehicles, according to the agency.
From 2011 to 2017, the automotive industry pumped $8.7 billion in capital investment in the state, according to the department, and the industry has quadrupled in size in South Carolina over the past two decades.
The state now is home not only to BMW but also plants for Volvo, Mercedes-Benz, Magna, Bridgestone and Michelin, among others.
John Bozella, president and CEO of Global Automakers, last week issued a statement on the potential import tariffs, saying he knew of no one asking for trade protection.
“If these tariffs are imposed, consumers are going to take a big hit, because they will have fewer vehicle choices and higher car and truck prices,” he said. “This course of action will undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”
According to BMW, its Greer plant employs nearly 10,000 people. BMW will create a further 1,000 jobs by 2021, bringing the number of jobs at the plant to about
The BMW Group produces BMW X models in the U.S. for both the U.S. and global
markets. With more than 371,000 units manufactured in 2017, the South Carolina BMW plant is currently the largest BMW Group plant worldwide with maximum production capacity of 450,000 vehicles per year, according to the company.
The plant exported more than 70 percent of its total production in 2017, a total 272,346 BMW X models, according to BMW.
About 70 percent of the steel and aluminum used in manufacturing BMW’s in the U.S. is produced in the U.S., company officials said.
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