Report: Trade War with China Would Hit BMW, Mercedes Operations in U.S.

If China moves ahead with punitive tariffs on American-made cars, the move could cost BMW and Daimler assembly operations in the U.S. $1.7 billion per year in fees, according to an analysis by New York City-based advisory firm Evercore ISI.

China has threatened to hike import taxes on cars from the U.S. by 25% in response to the Trump administration’s move to do the same on products from China. The U.S. tariffs are intended to put pressure on China to reform its intellectual property policies.

Evercore says the effect of China’s retaliatory tariffs will have less impact on most U.S. carmakers, which already locally produce most of what they sell in China, than they will on BMW and Daimler. That’s because both companies supply the Chinese market with a significant number of SUV/crossovers made in the U.S.

Tesla Inc., the U.S.’s third-largest vehicle exporter to China after BMW and Mercedes-Benz, would be hurt most among domestic brands. Tesla supplies all the electric cars it sells there from its factory in California.

Evercore describes BMW as America’s largest vehicle exporter in terms of value. The company’s huge factory complex in Spartanburg, S.C., supplies almost the entire global market for its SUVs, including about 64,000 units likely to be shipped to China this year.

Similarly, the plant operated by Daimler in Vance, Ala., will export about 51,000 Mercedes crossovers to China this year. Evercore estimates the combined shipments by the two U.S. facilities will be worth about $7 billion.

Evercore notes the long-term effect of punitive tariffs on car production is to cut exports and move production into the markets they serve. In the case of BMW and Mercedes, that would mean scaling back production and employment in the U.S. and increasing them elsewhere.