BMW, Daimler, Ford Motor Co. and other automakers that import vehicles into China face more costs, headaches and confusion in the coming months as a result of President Donald Trump's trade war.
China said last week that it would impose new tariffs by year end on $75 billion worth of U.S. goods, including vehicles, in retaliation for duties the Trump administration has threatened on Chinese goods as soon as Sept. 1. China also said it would reintroduce a separate 25 percent tariff on vehicle imports on Dec. 15.
Trump responded by saying U.S. companies that do business in China should look into moving those operations stateside, which isn't something that automakers with plants there can do easily. If anything, the extra tariffs would make local production more critical to supplying dealerships in China to avoid significant price increases on imports from the U.S. and elsewhere.
"Clearly, China is trying to send a signal that they will not back down," Jeff Schuster, president of LMC Automotive's Americas operations and global vehicle forecasts, wrote in an email. "The takeaway here is that the trade war is not going to be resolved any time soon, and the industry needs to be prepared for the volatility and the cost risks. In the end, the Chinese consumer will have to pay more for the imports or brands will have to absorb the cost of the tariff."
BMW and Daimler's Mercedes-Benz brand combined to account for 57 percent of the 230,115 vehicles exported to China from the U.S. in 2018, according to LMC Automotive. Ford represented 20 percent, followed by Tesla at 7 percent. Tesla, which is building a plant in Shanghai but doesn't yet make vehicles in China, is on pace to import more than Ford in 2019.
Overall, about 3 percent of the vehicles sold in China are made in U.S. assembly plants. U.S. exports of the X3, X5, X6 and other crossovers represented 12 percent of BMW's China sales volume last year, the most for any company besides Tesla.
"The tit-for-tat tariffs, absent any meaningful negotiations, are damaging to the American auto industry," John Bozzella, chairman of the ad-hoc group Here for America, which includes Volkswagen, Daimler and BMW, said in a statement. He said U.S. vehicle exports to China fell by half in 2017 after tariffs were imposed and that another such decline would cost American jobs.
Ford, in a statement, said it exports more vehicles to China than it imports from there to the U.S. and urged the two countries to "work together to advance balanced and fair trade."
Several other automakers declined to comment, deferring instead to the Alliance of Automobile Manufacturers in Washington. The alliance called the new tariffs "unfortunate for consumers and the entire auto sector."
Bloomberg contributed to this report.