The cruel irony in this is the most conservative people in this country are buying these nameplates and unknowingly, or unwittingly supporting the highest paid union workers in the world with the best benefits to boot. They just won a 28.5 hour work week, down from the brutal 35 hours in the previous contract.
Is this finally, the beginning of the end of "The Marshall Plan"
Leverage – EU Pledges Increased U.S. Investment in Effort to Avoid U.S. Auto Tariffs…
Posted on November 11, 2019 by sundance
Funny stuff amid headlines discussing the likelihood of President Trump postponing a 25% tariff on European autos. What the pundits are missing is how President Trump has positioned a myriad of trade dynamics that make EU action unavoidable. This is the fun stuff, so let’s enjoy the details.
The current headlines surround President Trump “postponing” a 25% tariff on EU automobiles as an outcome of the major EU manufacturers (mostly Germany) promising increased investment in their U.S. operations. By itself this would be considered a win for President Trump, but that’s not the whole picture, not even close.
What the more broad trade and manufacturing dynamic includes will explain what EU economists are only just now starting to realize. Yes, the major European auto-makers will put more investment into the United States (thereby lessening the EU industrial economy); however, the auto decision is not because they are presenting a magnanimous benefit of sorts, but rather it is a foregone conclusion; an unavoidable reality due to a previous trade agreement construct.
Within the USMCA agreement President Trump negotiated a win-win-win for Mexico, Canada and the U.S. through a requirement that 75 percent of North American auto content must originate from manufacturing within North America. Failure to reach that threshold means the auto company will be subject to a 25 percent tariff to bring the product to the U.S. market.
Example: Seeking to exploit the previous NAFTA loophole BMW recently opened a $2 billion assembly plant in Mexico. However, as soon as the USMCA was announced; and once they saw the loophole closure; BMW also had to announce they would open up a new engine and transmission manufacturing/production facility in the United States.
The USMCA deal meant BMW could not bring German transmissions and engines into Mexico for assembly. The origination requirements changed the dynamic of their production plan; and as a consequence their investment plan.
Keep in mind the steel and aluminum tariffs already exist. Most trade partners with the U.S. are operating under exemptions, waivers, provided by President Trump and his trade team. Those waivers can be withdrawn at any time.
The only time the Steel and Aluminum tariffs are gone permanently, is when the nation signs into an official trade agreement with the United States. [Keep this nugget in mind] All U.S. trade agreements also forbid the partner country from participating in transnational shipping of steel and aluminum.
Additionally, President Trump instructed USTR Lighthizer and Commerce Secretary Ross to use the leverage created within the USMCA (auto sector), in combination with the Steel and Aluminum tariffs, as pressure points -leverage- in all trade agreements with Korea, Japan, China and the EU. [Auto sector 232 tariffs]
Does it work?
Well, two examples: (1) South Korea opened up the KORUS deal to renegotiation specifically to avoid those tariffs (think Hyundai and Kia). The new KORUS deal positioned greater benefit to the US. (2) Japan opened up their market to U.S. agriculture exports in large part to avoid those tariffs (think Nissan, Toyota, Mazda etc.); and that became the framework for the recently signed U.S-Japan trade agreement.
So yes, it works.
That same leverage principle is at play with the EU. Germany must avoid U.S. auto tariffs at all costs. Additionally, Germany and the EU industrial companies, writ large, want to keep their waivers from Steel and Aluminum tariffs. However, Germany cannot avoid the tariff structure within the USMCA. President Trump has the EU over a barrel.
As an outcome of the USMCA, Germany was already going to have to manufacture content in the U.S. in order to avoid auto tariffs. Germany is not going to be able to bring German parts into the U.S. and assemble in U.S. made vehicles. They are going to have to produce more auto parts inside the U.S. The issue is a matter of timing.
As soon as the USMCA is ratified, Germany is going to have to make their U.S. investment. However, with the USMCA not yet ratified, President Trump has deployed the 25% auto tariff threat directly. This forces the EU to make their already unavoidable auto investment in U.S. manufacturing faster than they would like.
So there’s some nuggets of truth within the New York Times article:
The president has not yet announced a decision, and there is no guarantee that dangling new investments will stop him from imposing levies. Mr. Trump has repeatedly criticized Europe for flooding the American market with cars while limiting imports of United States vehicles.
[…] Some analysts say Mr. Trump and his advisers are more interested in the leverage the specter of auto tariffs creates than in actually imposing the levies. They have been willing to threaten tariffs to extract concessions in negotiations with Japan, South Korea and Europe.
Mr. Trump could decide to try to preserve his leverage by extending the deadline to make a decision. That would be frustrating for European officials, who say the trade war’s uncertainty has been dragging down economic growth. Germany, whose economy depends on car making, is on the brink of recession. (read more)
Useless thread that is only based on provocation and applause from regulars -table- brothers.The USA has labelled both Canada and the EU as threats to their "National Security" in order to justify new duties declared by their military Commander-in-Chief on the international trade of steel and aluminum. So I suggest that USA made products such as firearms and ammunition should be sold exclusively within the USA so Canada and Europe can help our esteemed neighbour defend themselves and improve their national security. Sadly, I have come to the conclusion that Canadians and Europeans should make do with their own products exclusively. For all our AfricaHunting friends in Canada, Europe, Africa and elsewhere, please don't buy any American made products. Lets's support the USA in their concern. One can never be too careful when there are evil guys to deal with, and it is our duty to help, as always.
Because people in this country buy hyped marketing. Example? Jeep has one of the worst reliability records but is one of the top sellers. Why? Because you can climb a mountain with it. Vortex scopes have a high return rate but since the name is catchy, people buy them. Foxi, you probably need to be born and raised in the U.S. to understand this thought process. Remember when people bought Pet Rocks? Did that make any sense? Consumers in this country are all about cachet, status and trying to keep up with the Joneses. Guaranteed, one person buys a Mercedes, his next door neighbors are going to go out and buy something better or what they perceive to be better. This is America, there ain't no other place like it on the planet.Useless thread that is only based on provocation and applause from regulars -table- brothers.
The question you should ask yourself: may free people decide freely ?
Develop good products (of which there are countless examples in USA) and the market will reward it.
Nobody buys a Heym(Merkel,Krieghoff ) double rifle here, or a Blaser R8 because they like the Germans so much, but the product is right.
What has the USA to fear, if German cars are just crap like you think, why the excitement?
Hogpatrol,Because people in this country buy hyped marketing. Example? Jeep has one of the worst reliability records but is one of the top sellers. Why? Because you can climb a mountain with it. Vortex scopes have a high return rate but since the name is catchy, people buy them. Foxi, you probably need to be born and raised in the U.S. to understand this thought process. Remember when people bought Pet Rocks? Did that make any sense? Consumers in this country are all about cachet, status and trying to keep up with the Joneses. Guaranteed, one person buys a Mercedes, his next door neighbors are going to go out and buy something better or what they perceive to be better. This is America, there ain't no other place like it on the planet.
Edit: People in German are no different. They buy Merkel, Heim, etc. because they want to ber perceived as buying something better than the next guy. Those rifles don't shoot any better than a lot of mass produced rifles. They may look better but I'd challenge any one of them to shoot better than a no name one I built myself or came out of a plant in the U.S.