BMW thrust into political battle over trade
BMW says exports from its Spartanburg plant helped lower the U.S. trade deficit in 2017 by more than $1 billion.
How did BMW, whose Spartanburg, S.C., plant has been acclaimed as a symbol of America’s resurgence as an auto manufacturer and exporter, become a symbol of the threat to America’s manufacturing base instead?
BMW is wondering the same thing.
The plant, deep in the heart of Trump country, was the No. 1 U.S. automotive exporter in 2017, producing 272,346 BMW X models for foreign markets, representing a total value of about $8.8 billion, BMW said. That output makes it a net exporter from the U.S., unique among foreign automakers with U.S. factories.
“As a firm, with respect to trade in finished automobiles, BMW lowered the U.S. trade deficit by more than a billion dollars below what it otherwise would have been” in 2017, parent company BMW Group said in comments submitted to the U.S. Commerce Department, zeroing in on President Donald Trump’s principal measuring stick for judging the merits of trade relationships.
And yet it’s BMW that has been thrust in the middle of multiple trade battles involving China, the EU and Mexico, driven by Trump’s insistence that foreign producers and plants are bleeding the U.S. and its economy. The administration has threatened a 25 percent tariff on BMW’s imports from Europe and Mexico, while its exports could face retaliatory EU tariffs on top of the ones China has imposed.
BMW and its supporters, especially in South Carolina, have reacted strongly to the tariff threat.
“Recognizing that BMW’s Spartanburg facility is the only net exporter plant in the U.S. — shipping about 70 percent of its production to more than 120 countries — it should be exempt from tariffs,” said South Carolina Commerce Secretary Bobby Hitt, in an email to Automotive News. Hitt is a former spokesman for the Spartanburg plant.
The American International Automobile Dealers Association said in comments to the Commerce Department that U.S. tariffs would undermine rather than enhance U.S. national security.
BMW denied a report it was cutting U.S. production due to tariff threats.
No manufacturer operating in the U.S. wants a trade war. The auto industry has pointedly noted that it didn’t ask for protection under the national security provisions of trade law that Trump is invoking to investigate the impact of auto and parts imports.
“There doesn’t seem to be anybody in the auto industry who thinks this is a good idea,” said Laura Baughman, president of the Washington- based consulting firm Trade Partnership Worldwide LLC.
Nevertheless, some political observers believe the Trump administration sees the threat of tariffs on national security grounds as politically popular heading toward midterm elections, she told Automotive News in a phone interview.
That leaves BMW not only scrambling to figure out how to adjust its production but also fighting a political battle in the U.S. that it never thought it would have to fight.
“If the objective of the Section 232 tariffs would be to reduce the trade deficit, we respectfully request that proper consideration is given to the contribution of exporting companies that are already reducing that deficit,” BMW told the Commerce Department.
BMW’s heightened sensitivity was evident last week when it rushed to deny an erroneous press report that circulated in several media outlets around the country and in Germany. The report, which according to BMW originated with a local newspaper in South Carolina, incorrectly suggested that in reaction to the tariff threat, BMW was reducing U.S. production and moving some production to China.
In fact, the company said that it was adding BMW X3 production in China, but that the plan had no bearing on U.S. production. If anything, the South Carolina plant is adding jobs and capacity. An all-new model, the BMW X7, goes into production there this year, BMW said.
Graham: Better if barriers fall
In an email response to questions from Automotive News, U.S. Sen. Lindsey Graham (R-S.C.) suggested that the tariff threat was part of a bargaining strategy to level the playing field with overseas trading partners.
“I would tell South Carolina businesses, ‘I get your message, but you have to understand why President Trump won,’ ” Graham said. “This will hopefully turn out well. It’s better for business if some barriers fall. You make a car in South Carolina and sell it in Europe, it’s like five times the tariff. That needs to change.”
U.S.-built cars are subject to a 10 percent EU tariff, while the U.S. charges a 2.5 percent tariff for imported cars from Europe and a much higher rate for pickup trucks and cargo vans.
Gary Hufbauer, an expert on international trade and a fellow at the Washington-based Peterson Institute for International Economics, speculated that the Trump administration could ultimately back off on onerous import tariffs for mass-market brands but stick with tougher duties on high-end brands.
“If [Trump] ends up with some tariff, it will be the BMWs, the Porsches, the Mercedes at the high end,” he said in an interview. “It’s a little harder for millionaires to complain about paying more for cars. That’s what’s going against BMW.”