European carmakers plead for ‘grand bargain’ with Trump to avoid tariffs
Carmakers including BMW and Mercedes have urged Brussels to strike a “grand bargain” with Donald Trump to prevent disaster for Europe’s auto industry.
The European Automobile Manufacturers’ Association (ACEA) is calling on the European Commission to fight to keep open trade with both the US and China even as the two nations enter a new trade war.
The plea comes as Mr Trump prepares to return to the White House next week. He has promised to levy heavy tariffs on Chinese imports to the US and there are fears that the new president will look unfavourably on countries that continue to trade freely with Beijing.
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The ACEA, which also represents manufacturers such as Renault, Volkswagen and Jaguar Land Rover, said both the US and China were equally vital to the success of the Continent’s car industry.
Ola Källenius, president of the group and chairman of the management board of Mercedes-Benz, said in a letter to EU leaders: “Overall, it is essential to recognise that trade with China and the US is the most vital for the prosperity of the European economy.
“The EU should seek a grand bargain with the US and attempt to avoid a potential trade conflict.”
Closer ties with China are needed, he added. The EU has ramped up tariffs on Chinese-made electric cars, a move opposed by much of the German car industry over fears Beijing will retaliate with sanctions of its own.
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Mr Källenius wrote: “Both regions, the EU and China, want to protect jobs in their home markets, while reaping the benefits of free international trade. In that regard, both sides have an interest in finding an agreement.
“Potential trade wars have no winners. Protectionist measures are not necessarily the best solution.”
The request comes at a time of intense pressure on the European car industry, which has struggled to compete with low-cost Chinese electric vehicles (EVs) and fund its own transition to electric.
Stellantis, which owns Vauxhall, is closing its factory in Luton, while Volkswagen has slashed pay as part of a deal to avert plant closures in its native Germany. Ford has also set out plans to cut 800 jobs in the UK amid weak sales of electric vehicles.
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Attempts to increase European battery production have also struggled, with Britishvolt and Sweden’s Northvolt running into trouble when trying to establish gigafactories.
The ACEA urged the EU to offer subsidies and incentives to drivers to buy EVs, rather than punishing manufacturers with fines for failing to sell enough of the new models.
Analysts warned that it may not be possible for Brussels to thread a path between China and the US, given the pair are at loggerheads over trade practices.
Michael Every at Rabobank said Mr Trump’s policy announcements to date “strongly suggest what the logic of Maga already points to a world where very few will be free to choose to trade openly with both sides, as today.”
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He said: “Europe may have to decide which is the least worst option for it with the best possibility of compensating future growth after a set-back – and I mean Europe, not German auto firms, or any one lobby group.”
The new president may choose to declare trade policy a matter of national security, enabling him to impose tariffs via executive order from the moment of his inauguration on Monday.
Alternatively, he could take a slower path seeking congressional approval for taxes on imports, which would give Brussels more time to seek to negotiate.