What is the biggest threat facing European automakers this year? The rise of transportation-as-a-service (TaaS) and the growing number of customers who opt for these services instead of traditional car ownership? Non-traditional automakers, like Tesla, that appear ready to skip the dealership experience entirely and sell directly to the consumer online? Or how about the current movement in many regions to place a greater emphasis on public transportation and investments in local infrastructure?
According to Volkswagen head honcho Herbert Diess, the answer to this question is actually "none of the above."
Instead, Diess points to the erratic and confrontational dialogue regarding tariffs coming forth from the White House as the greatest threat to Volkswagen and other automakers from across the pond. In total, the potential 25 percent tariff against European cars President Trump is currently considering could cost this German automotive mainstay nearly €2.5 billion (roughly $2.83 billion) a year. For those doing the math at home, that is 13 percent of the company's expected earnings over the same time period.
As Patrick McGee of the Financial Times also reports, Diess is not alone in feeling apprehension about the current administration's stance on tariffs and global commerce. In echoing these sentiments, German Chancellor Angela Merkel has also described President Trump's threats of tariffs as "frightening."
With Commerce Secretary Wilbur Ross submitting his recommendations to President Trump on the subject of whether or not European cars pose a national security threat to the nation last week, the White House now has 90 days to decide if it will institute tariffs in accordance with section 232 of the U.S. Trade Expansion Act.
If it does, then the administration will be following in the footsteps of its decision to impose tariffs on aluminum and steel – and potentially send the European automotive marketplace (which factors heavily into the greater global supply chain) into a complete tailspin.
Should the United States impose tariffs on European automakers as part of a greater move back toward the protectionist policies of the distant past? What impact could this move have on dealerships here at home that currently stock Volkswagens, BMWs, and vehicles from other European automakers?
To dig into these questions, and learn a little more about the on-going discussion surrounding trade tariffs and the global automotive industry, be sure to check out the full story from McGee and the Financial Times by clicking on the link we have provided down below.