Washington showdown for German car bosses | Business| Economy and finance news from a German perspective | DW | 04.12.2018
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Washington showdown for German car bosses

Leading German car executives have been invited to Washington for talks with the US government. The auto pow wow offers carmakers the chance to speak their mind, but what they don't say might carry the most weight.

The meeting in Washington with BMW, Daimler and Volkswagen (VW) bosses on Tuesday is just the kind Donald Trump likes.

The US president relished such high-level pow wows when he fronted the television show "The Apprentice." And he showed his taste for them hadn't dimmed earlier this year at the World Economic Forum in Davos, when he sat in a much-publicized meeting with the heads of several large corporations.

The bosses relayed their companies' US achievements and plans to a purring Trump, who sat like a proud teacher, surveying the perfectly executed homework of his devoted pupils.

Star pupils

The German car bosses will have also done their homework.

Daimler boss Dieter Zetsche can brag about the expansion of the group's plant in Alabama, which has had an extra $1 billion (€877 million) pumped in. The plant already employs 4,000 people.

Herbert Diess can emphasize VW's plans to build electric cars in the US. The company already employs 3,500 people in Tennessee, with 1,000 more jobs to be added in 2019.

Weltwirtschaftsforum 2018 in Davos | Dinner CEO's & Donald Trump, Präsident USA (Reuters/C. Barria)

Donald Trump meets CEOs and business leaders in Davos

And if BMW boss Harald Krüger had wanted, he could have gone to Washington to big up his company's plans for a new engine plant in the United States, in addition to the large facility it already operates in South Carolina. Around 9,000 people work there, with another 12,000 employed as suppliers. However, Mr. Krüger is not going to Washington — BMW CFO Nicolas Peter is there instead.

Together, the bosses can bring greetings from the German car industry as a whole. After all, as the German Association of the Automotive Industry (VDA) likes to stress, German carmakers and suppliers employ 118,000 in the US.

Being seen, if not heard?

Trump's interest in the meeting is obvious. The great dealmaker wants to take credit for any investments that have been, or will be, made.

The whole event is "nothing more than a pompous show by Mr. Trump to make headlines," sniped US economist Dennis Snower, president of the Kiel Institute for World Economics (IfW), in the Handelsblatt newspaper. "The CEOs have no authority to negotiate."

Read more: Opinion: Donald Trump and his useless rage over General Motors

When the issue of the high tariffs levied on US cars entering the European Union is raised, as it surely will be, the German car bosses will be able to do little more than shrug their shoulders. The European Commission, not German carmakers, deals with trade and customs matters. 

Indeed, German Chancellor Angela Merkel was moved on Monday to point out that the meeting was not about trade issues.

Infografik Autoabsatz USA EN

And now, breathe

That all said, the meeting isn't a bad idea, according to Stefan Kooths, trade expert at the IfW. "Talking to each other in Washington certainly can't hurt," Kooths told DW. It could help "relax relations" if the Germans can convince the US government "that Americans are not victims of car trafficking."

The Germans can also point out that their activities help reduce the US trade deficit, by virtue of the fact that every fifth car they build in the US is sold to China.

Following the G20 summit in Buenos Aires at the weekend, Trump tweeted that "China has agreed to reduce and remove tariffs on cars coming into China from the US." Beijing has yet to confirm this, but German car bosses would certainly welcome such a move.

The European visitors may refrain from mentioning in Washington that the Chinese market for their cars is far bigger and more important than the US one.

Volkswagen sells 44 percent of its cars in China, compared to 6.2 percent in the US. Daimler and BMW each sell 14 percent of their cars to the US market, far less than the 26 percent and 24 percent respectively sold to China.

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Appease or threaten?

Still, if Trump made good his threat to impose 25 percent tariffs on European cars, it would be a disaster for the German car industry.

Currently, duties of 2.5 percent are levied on European cars entering the US. Conversely, US cars are hit with 10 percent tariffs going the other way. Trump has repeatedly said this is unfair. The situation is different with trucks and pick-ups though, which are subject to import duty of 25 percent in the US, compared to 14 percent in the EU.

The Germans may well promise to relay Trump's concerns to Berlin and Brussels. They might even tell him themselves they want tariffs gone altogether.

But because they have no actual power over such things, they could be forced to rely on the implicit threats they can make themselves. If punitive tariffs of 25 percent are on the table, then sustained investment in the US is surely off it.

Such words may be left unsaid, and only appear in the room as daggers in the men's smiles — probably the kind of communication Trump understands best.

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