Whether it’s trade, military spending, migration or energy policy, Donald Trump has been pretty scathing about the Germans lately. He owes at least some of them an apology. About 5,700 German residents bought a U.S.-built Ford Mustang last year. When you consider how snooty Germans are about American cars and the EU’s 10 per cent tariff on imported vehicles that so vexes Trump, that’s not too shabby. Still, 55,000 Porsches were sold in the U.S. last year, so you can at least see the point the president is trying to make about who’s winning here.
It’s equally true for overall car sales. The yearly U.S. trade deficit with Germany on vehicles is about $10 billion (including cars that German companies make in the U.S. and ship back home.) I’ve said before that this probably just reflects how German-branded cars are preferable to U.S. ones, but Trump won’t look at it that way — at least not in public.
The imbalance is one reason why European Commission president Jean-Claude Juncker looks doomed to fail when he visits Washington next week to discuss a possible global deal on car tariffs — as reported by Bloomberg News. Germany has far more to gain from such an arrangement than the U.S. does.
Even Berlin’s most important European partner is unlikely to back the idea. Why would France, which sells hardly any cars in the U.S., want to let cheap vehicles into its market without getting much in return? A sweeping trade deal that also allowed countries to export more to Europe without paying much of a tariff would no doubt end up hurting France more than Germany. Peugeot SA and Renault SA focus more on mass-market vehicles where competition is toughest and margins are thinnest.
You can see why the German giants Volkswagen AG, Daimler AG and BMW AG would be keen on an agreement, though. Trump’s threatened 20 percent tariff on their exports will have concentrated their minds wonderfully. As such, they appear to have seized on his throwaway remark at last month’s G7 summit that governments should consider scrapping all tariffs and trade barriers. Yet the comment should be treated like many of the president’s public pronouncements: a fiction until proven otherwise.
Trump has happily undermined exactly the kind of multilateral trade deal that Juncker wants to tout, including the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership. He’s not too fond of the North American Free Trade Agreement either.
A deal would also mean the U.S. giving up its 25 percent levy on imported light trucks. Not for nothing, the top-selling U.S. vehicles last year were all trucks: the Ford F-series, Chevrolet Silverado and Ram pickup. Exposing them to more foreign competition would hardly put “America First.”
And it’s not as if the scrapping of tariffs would have Europeans rushing out to buy American cars just because they’re a bit cheaper. Vehicle tastes in Europe and the U.S. remain pretty far apart. Juncker’s idea looks like a non-starter.