Why Trump’s Tariff on Luxury Cars Could Backfire

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A German magazine reported on Thursday that President Trump told President Macron of France that he wants to ban imports into the U.S. of luxury cars made in Germany. Last week Trump directed Commerce Secretary Wilbur Ross to investigate the threat to U.S. national security posed by imported cars, trucks and auto parts.

The United States is a big market for top German luxury carmakers like Mercedes-Benz, BMW and Volkswagen’s Audi and Porsche divisions. Not only that, but Mercedes-Benz and BMW also build a number of cars in the United States both for the U.S. market and for export.

Last year German automakers exported a total of 494,000 cars to the United States and built 804,000 cars in the country. According to Germany’s VDA auto industry group, German carmakers built 7.4% of all U.S.-manufactured cars in 2017. Nearly half of all US.-built cars with a German nameplate are exported to Europe and about 25% of all U.S. exports of light vehicles are German brands.

In 2017, BMW built 371,284 X-model sport utility vehicles (X3, X4, X5 and X6) at the company’s manufacturing facility in Spartanburg, South Carolina. The plant exported 272,346 units last year, with an approximate dollar value of $8.76 billion.

Mercedes-Benz is the top auto exporter in the state of Alabama, according to the state’s Department of Commerce. Total production figures are slippery, but the number of cars Mercedes builds in Vance, Alabama, is approximately the same as the 371,000 that BMW builds in South Carolina. In 2017, the Vance plant exported $5 billion worth of new cars out of a total of $7.75 billion for the entire state. The company builds its GLE and GLS SUVs here, as well as some GLE and C-Class coupes and sedans.

For the month of April, Mercedes-Benz sold 30,022 vehicles in the United States and has sold a total of 116,682 for the year to date. GLS/GLK compact SUVs accounted for 5,853 units in the month and a total of 22,113 for the year. GL/GLX full-size SUVs accounted for 1,794 units in April and 7,290 for the year. Midsize GLE SUVs accounted for 4,110 in April and 15,766 for the year.

BMW sold 23,482 units in the United States in April and has sold 97,317 for the first four months of the year. Of those totals 3,865 were X3 models (14,647 for the year), 193 were X4 models (1,610 for the year), 3,800 were X5 models (15,876 for the year) and 592 were X6 models (2,611 for the year).

Roughly 30% of all BMW’s sold in the United States are sold here, and the rest are imported. The Mercedes-Benz proportion is slightly higher: about 39% of vehicles sold are built in the United States and the rest are imported.