Companies Fear Serious Consequences In Light of Import Tariffs

German companies and trade associations are warning of far reaching consequences in regard to the new U.S. tariffs on steel and aluminum. The automaker Volkswagen disclosed its fear “that this represents the beginning of a negative progression of measures and countermeasures; at the end there won’t be any winners.” The political dialogue between the U.S. and the EU needs to be ramped up in order to avoid lasting economic damage. Further escalation will only hurt both sides.

To dismantle trade barriers, the company claimed that it would welcome the resumption of negotiations for a bilateral transatlantic agreement between the EU and the U.S. The automotive industry has long-term investments, products and production cycles and is thus dependent on steady international conditions.

U.S. Secretary of Commerce Wilbur Ross disclosed Thursday that the U.S. is going to raise tariffs on imported aluminum and steel from the EU beginning on Friday. President Donald Trump could have raised this punitive tariff upward of 25 percent on steel and 10 percent on aluminum beginning in March, but exempted the EU for the time being. Negotiations over a more permanent exemption, however, did not lead to a breakthrough. The EU promptly announced countermeasures, as did U.S. neighbors Canada and Mexico, which have also been affected by the tariffs.

Industries Fear an Influx of Steel From China

The Association of German Chambers of Industry and Commerce (DIHK) also fears a chain reaction. According to an excerpt in Germany’s “ARD Morgenmagazin” from deputy DIHK managing director Volker Treier, if someone in the current age of networked production systems “began using antiquated 19th century tools,” then it could affect the economy and jeopardize world trade systems as a whole.

As a result of this decision, the U.S. would become a less attractive manufacturing base, said Treier. However, until this realization hits Washington, “it seems that a lot of time is slipping by.” The hope that this “intense pressure” and “permanence of these demands” with such high impositions will cause the U.S. to react and change its position, does not carry much weight at the moment.

In addition, auto manufacturer BMW wants to examine the repercussions of the U.S. tariffs on its operational businesses. Currently, the company claims to source more than 70 percent of the annual steel demand at Spartanburg’s U.S. factory on the local level. This amount is only going to increase.

Steel company Salzgitter was also quick to react. “Our immediate concern is minor,” the company said. Nevertheless, Salzgitter demanded that the EU commission “take quick and appropriate measures, in order to protect the EU’s steel industry from ill-thought steel quantities.” The absolute import level in the EU is already higher than in previous years. Local companies fear that the U.S. tariffs could lead to a forced increase of Chinese steel in the European market.