Hyundai's boss, Euisun Chung, late announced in Washington DC huge investments in the USA, without sparing praise and friendly looks at president Donald Trump. The company's inheritance, which is 1 of the richest people in South Korea, promised to invest 21 billion dollars (91 billion PLN) in the US in 4 years. The plans besides include the construction of a steelworks in Louisiana.
"The money is coming," said the American president in front of the White home cameras with joy, attributing it to his hard trade policy. 3 days later, he announced 25% work on all imported cars. To the detriment of Hyundai and virtually all another abroad car manufacturers. The Koreans import 2 of the 3 vehicles to the US, almost duty-free so far.
Integration, Doing what Trump likesShe seemed a promising strategy in dealing with a man in the White House. But this is the past: “America First” — this time the US government is pursuing this course more consistently than Europeans always imagined. He'll bring it. fundamental changes for the global economy. The German business model, based on free trade, exports and globally oriented companies, is at risk. At least in North America there is simply a hazard of shocks that will affect not only car manufacturers.
Many politicians, managers and economists inactive believe Trump is yet active in the deals. That it uses tariff threats as a means of exerting pressure to accomplish agreements beneficial to the US. But what if that presumption isn't real?
Trump's election promise
Even during Trump's first term, there was assurance that he would yet neglect to implement the announcements he made during the election campaign. In fact, the then president of the European Commission, Jean-Claude Juncker, was able to save Europeans from stricter trade restrictions, in peculiar car duties, thanks to the agreement in Washington.
Now, however, Trump decided to implement his promises on customs. The president of the United States does not believe in free trade, but in isolationism and tariff conflicts. All he cares about is jobs for Americans “He said at a gathering with Hyundai. Customs gross is intended to fund the state's money with billions and let the government to lower taxes and pay off massive US debt. It seems little and little likely that Trump will break that electoral promise.
Economists so see the request to adapt Germany to the fresh reality of trade policy. “The German business model with its export orientation and focus on the automotive manufacture and mechanical engineering is under pressure,” says Clemens Fuest, president of the Ifo Institute. — However, abandoning export orientation as the US is becoming more protectionist and dependence on China is risky would mean spilling out a baby with a bath.
Fuest advocates The search for fresh trading partners. The global economy is increasing and many emerging countries are willing to enter into trade agreements with the EU. “ Moreover, further deepening the interior marketplace of the EU offers large potential,” says president Ifo. However, Germany must better prepare for this. “In order to effectively manage structural change in Germany, we request better conditions for innovation and start-ups, as well as greater efforts in the areas of school education and vocational education and training.
Giant Network
For German companies there is no alternate to focusing on the global economy. The country is the 3rd largest economy in the world, with only 83 million inhabitants. Even the EU interior marketplace is far insufficient to keep and, if possible, increase economical performance.
The business model has already changed importantly in fresh years. alternatively of producing cars or machines in the country and sending them around the world, companies are increasingly producing where their customers are. On this basis, it is based, for example, on BASF, building immense chemical plants in China. car manufacturers have besides been applying this strategy for years, resulting in large and tiny suppliers following them abroad.
For decades, in the United States, Canada and Mexico, a closely linked network of car suppliers and manufacturers has developed. This includes BMW, Mercedes-Benz, Volkswagen Group, Bosch, ZF, Continental and hundreds of another companies in the industry. Trump now threatens to break the network — and at the same time to connect to Europe.
SVEN HOPPE / PAPBMW office in Munich
— Announcement of additional duties on cars by US president Donald Trump is a large step backwards for a fair and principle-based trade that creates growth and prosperity worldwide, criticises Hildegard Muller, the head lobbyist of the German automotive industry.
According to the German Automotive manufacture Association, headed by Muller, companies employment a full of nearly 140,000 people in the United States. They produce about 900,000 cars a year. In addition, cars from Europe are imported into the US, albeit to a much lesser extent. “If you prosecute the “American” policy, you will end up alone erstwhile it comes to trade policy,” warns the expert. “This cannot be profitable for an American economy that depends on global markets.
Sales drop, profits drop
Analysts of the Swiss bank UBS consider Germany major failure of U.S. car duties. Even assuming that producers can transfer any of the increasing costs to their customers, the decline in profits by 10-20 percent remains a hazard to German companies.
Car manufacturers only have a choice two bad options: if they introduce duties, they will lose millions of customers. If they keep prices stable, their profits will shrink. The Bank of America estimates that companies in the US would sale 3.2 million less vehicles per year if they were to transfer a full 25% surcharge to customers. With a 15% increase in prices, sales would inactive decrease by 2.5 million vehicles.
Nevertheless, the manufacture does not lose hope that the US government will return to the transatlantic partnership. The EU-US trade conflict "would only lead to losers," says BMW. "Both parties should so rapidly find a transatlantic agreement that generates growth and prevents spirals of division and barriers to trade".
BMW runs its largest mill in the planet in the U.S. state of South Carolina, but besides produces in Mexico and delivers to the US vehicles from Europe specified as the BMW 7 series. The Group has put a billion euro to defend itself against the risks arising from customs conflicts. Preventive measure: "We presume that not all customs tariffs presently in force will proceed to apply until the end of the year," said BMW CEO Oliver Zipse in mid-March.
A very crucial market
Others have not dared to see specified predictions. “We are looking closely at the situation,” says Jurgen Rittersberger, Audi’s financial director, about the customs debate. “ America is simply a very crucial marketplace for us, the second largest car marketplace in the world,” he adds. Audi has advanced hopes in the US, besides to compensate for problems in China. The VW subsidiary is presently introducing many fresh models — but they are all exported from Europe to the US.
— In the short word we have limited possibilities: we can control the production of cars and prices. We besides analyse different location options within the group, says Rittersberger. In the future, Audi models could besides be produced at the VW mill in the USA.
A mill is presently being built in South Carolina for the fresh Scout brand. However, in the industry, years have passed since the decision to "localise" to start production. However, specified investment would be well received by the US government. possibly VW CEO Oliver Blume will shortly stand next to Trump in the White House.
