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US-China Trade War Again Engulfs BMW, Mercedes-Benz And The Likes

US-China Trade War Again Engulfs BMW, Mercedes-Benz And The Likes
The number vehicles that are exported to China from the United States was reduced by 50 per cent after the former imposed a retaliatory tariff to those of US president Donald Trump by imposing a 25 per cent tariff on US made cars in the middle of 2018.
But for most of 2019, most of the additional levies were dropped by China. However Beijing is now issued threats of re-imposing the tariffs as a retaliation to the latest round of fresh tariffs imposed by the Trump administration on Chinese goods which is set to be implemented form September 1.
While bringing back of the tariffs by Beijing would hit American carmakers Ford Motor Co and Tesla Inc, it would deal a bigger blow for the German auto brands that manufacture Mercedes-Benz and BMW sport-utility vehicles at facilities in Alabama and South Carolina in the US.
"This puts the industry in a very difficult position," said Alan Baum, an independent auto analyst in West Bloomfield, Michigan. "This could prompt a reaction from the US, which could mean more tariffs on parts from China. It makes it difficult for automakers to plan on where to invest."
Trump tweeted his decision to increase tariffs on US$250 billion of Chinese imports to 30 per cent from 25 per cent on October 1 after the closure of markets last Friday. He also simultaneously announced that he would also increase the tariff to 15 per cent from the existing 10 per cent for the remaining US$300 billion of Chinese goods imported into the US applicable from September 1.
During 2018, six of the 10 most popular US vehicles exported to China were sold by BMW AG and Daimler AG combined. In 2018, a hit of 300 million euros (US$333 million) could be taken by BMW due to the trade war between the US and China. The first major company to reduce forecast and profit targets last year due to the trade war Mercedes parent Daimler. And levies on auto parts and further retaliation measures would hit auto companies such as General Motors Co. that manufacture most of the cars locally in China for the Chinese market.
The stock price of BMW reached its lowest in seven year on Friday after falling by 3.2 per cent. On the other hand there was a 3.1 per cent fall in share prices of Daimler and a 4.8 per cent drop in stocks of Tesla at New York because it is among the companies that are exposed most to the trade war. The shares of GM and Ford also slumped following Trump’s tweet.
While the valuation and market cap of auto companies have been hit uncertainty about trade barriers which also includes the possible US tariffs on vehicles imported from the European Union such as the high-margin Porsches, all of the companies had a time frame of almost two years to create strategies to offset these threats, said analysts.

Christopher J. Mitchell

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