The US President sparked a war of words with the European Union by threatening to “apply a tax” on cars made in Europe if the EU retaliates against his new round of trade penalties on imports of steel and aluminium.
President Trump wants to impose tariffs up to 25 percent tariffs to the imported metals in a bid to rejuvinate industry in the US.
European Commission president Jean-Claude Juncker hit out at the US president vowing to draw up harsh measures against leading US brands such as Levi’s and Harley-Davidson.
Mr Trump later said “trade wars are good”.
The threat from President Trump has caused panic among experts in Germany’s car industry, which exports hundreds of thousands of cars to the US each year.
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Stefan Bratzel, of The Centre of Automotive Management (CAM) think tank, said the punitive tariffs would be a “catastrophe” for the German industry.
Last year German companies exported about 494,000 cars and employed 36,500 people in the US, according to the German Association of the Automotive Industry (VDA).
Sales in the US also increased by about one percent to 1.35 million new cars in 2017 compared to the previous year, making their market share 7.9 percent.
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German car bosses are quaking in their boots over Donald Trump’s threat to tax European cars
Bernhard Mattes, president of the VDA, said: “A trade war between the US and Europe must be avoided at all costs. In such a trade war there are only losers, on all sides.”
Ferdinand Dudenhöffer, a car expert and professor of business administration at the University of Duisburg-Essen, has calculated that Volkswagen’s subsidiaries Audi and Porsche would be the most affected.
Audi and Porsche do not own plants in the US – unlike VW, Daimler and BMW – meaning it would be hit harder by a tax.
Mr Dudenhöffer calculates that punitive taxes would cost VW a loss of profit of about five percent if it isn’t offset by exports from the US. For Daimler and BMW he thinks it would be “less than 10 percent”.
A trade war between the US and Europe must be avoided at all costs
Meanwhile Holger Bingmann, president of the German Association of Wholesale, Foreign Trade and Services, warned a trade war between the US and EU could bring of unpredictable consequences.
Mr Bingmann added: “What Trump is doing in trade policy is frightening. He seems even more ignorant than expected in economic matters.
“Or he is simply unscrupulous about endangering jobs in the US and elsewhere for his show-fight. That’s bitter for longtime US partners like Germany.
“A lot depends on China in the current situation.
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Audi and Porsche do not own plants in the US meaning they would be hit harder by a tax
“It is very difficult for the EU to respond appropriately to these antics. The now looming trade war is very risky, because no one knows how, for example, China will react.
“I absolutely don’t know what Trump’s intentions were with this course, which is even controversial among the Republicans.”
Donald Trump previously announced punitive tariffs of 25 percent on all steel imports in a bid to protect the US’s domestic industry.
Imports on aluminium are to be raised by 10 percent making imports to the US more expensive.
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Punitive tariffs would be a ‘catastrophe’ for the German industry, Stefan Bratzel says
However, Mr Bratzel dismissed Mr Trump’s allegation that US automakers were disadvantaged in Europe as “utter nonsense”.
He added that there just was not the demand for US cars with mostly large mileage in Europe, so it is more of a design problem.
Mr Bratzel said: ”The US manufacturers have, for example, no premium products.”
A branch representative, who did not want to be named, emphasised: “This is not a question of tariffs, but of the models.”
He pointed out that pick-ups and SUVs are taxed at a higher rate of 25 percent in America than in the EU with 22 percent and almost all German companies are already building their vehicles for the US market in America.