The war of words between President Donald Trump and the EU could lead to some serious pressure on the German auto industry, one expert told CNBC.
Trump threatened via Twitter on Saturday to hit back at any tariff measures from the European Union — floated in response to Trump’s recently announced global steel import tariffs — in kind. The billionaire businessman’s potential next target? European cars. And the biggest victim of them all may be Germany.
“It would be quite severe if we were to face additional import duties to ship the cars into the U.S. — the Germans in particular are very, very exposed,” Arndt Ellinghorst, the head of global automotive research for advisory firm Evercore ISI, told CNBC Monday.
He noted the example of BMW, which sells about 350,000 cars in the U.S. annually, roughly 70 percent of which come from Europe. “That’s probably an $8 billion to $9 billion revenue stream, if you put a 5 to 10 percent additional cost on it, it would cost something like $400 million to $800 million. Some of that would be absorbed by the company, and some of it would have to be absorbed by the consumer in the U.S.”
Ellinghorst did add that cars being shipped from the U.S. into Europe faced a 10 percent import duty while European cars into the U.S. faced a 2.5 percent import duty. “I think what the administration is talking about is to balance out this difference in tariffs to make it more of an equal playing ground for American and European carmakers,” he said.
