Trade dispute hits German companies

Criminal duties trade dispute hits German companies

  • German cars, built in America, sold to Asia. That’s how connected the world is by now.
  • Exactly what will be a problem for German car companies. The trade dispute between the US and China also hits its stores.
  • The unrest is also growing in other branches of the German economy.

Caspar Busse has been working and writing for the Süddeutsche Zeitung since mid-2005, first in economics, then in media, and then in 2009 as chief economics editor, responsible for all corporate reporting. Previously studied economics at the Ludwig-Maximilians-Universität in Munich and then completed training at the Georg-von-Holtzbrinck-School for business journalists in Düsseldorf. For a total of ten years at the Handelsblatt, as a correspondent in Berlin and for five years as head of the Munich Handelsblatt office.

Max Hägler is an editor in the economics department. Born in Munich, studied Political Science there. During the civil service building a publishing house GmbH. For the 2005 general election, he began to report as a national correspondent for the “taz” from Bavaria. Since summer 2008 he is with the Süddeutsche Zeitung: first as Bayern correspondent in Regensburg, later as a business correspondent for Baden-Württemberg.

In the corporate headquarters of the car companies, the problem is shown graphically: world maps with arrows hang in Stuttgart, Munich or Wolfsburg, therein the trade flows are recorded: Between East and West across the Atlantic go the arrows, import, and export between the US and the European Union. This is already complicated, and this raises the question of how the currently constantly discussed problem – massive tariff increases – has an impact. Trade and business are getting harder, the arrows thinner, maybe that’s why jobs are in danger.

But since Friday at the latest, the whole world map is in view. Because the arrows of the German auto companies also reach to China. It is now the largest single car market – which is served not only from Europe but also from the US. German cars, built in America, sold to Asia. That’s how connected the world is by now. So vulnerable you are given the recent facet in the tariff dispute. Above all, Daimler and BMW are affected. The Stuttgart had to reduce their profit forecasts. This is not yet in the hands of the people of Munich, but they are already anticipating price increases in China. For models that are built in the US and brought to China, currently the “necessary price increases” are calculated and announced at a later date, said the carmaker on Friday. Car manufacturers Ferdinand Dudenhöffer from the University of Duisburg-Essen estimates that the two manufacturers will be shipping about 250,000 cars a year from US plants to China. BMW exports models of the X-series from Spartanburg, Daimler large SUVs of the series GLE and GLC from Tuscaloosa. These products are affected by the “largest trade war in economic history,” as China now calls developments. So restless is the situation that in the corporate headquarters at the end of the week did not even know from when exactly the higher tariffs apply and how high they are. 40 percent of tariffs is now the speech, instead of 15 percent as before. The US has submitted in this amount, China responded. And the Germans are suffering. In response, they also think about a stronger localization, so about a car in China. Already in China, about 400 000 BMW is built, such as the X3 or the long version of the 5 Series sedan. Daimler also manufactures locally, such as the C-Class, the E-Class or the GLA. “Further production relocation to China will of course cost short-term profits,” says Dudenhöffer. “But the carmakers are not thrown off track.” An exhausting, expensive dispute, but even more challenging would be, if in a further escalation level, the goods traffic between the EU and the US taxed higher. 2.5 percent towards the US, 10 percent towards Europe – these are currently the customs hurdles in the automotive industry. BMW costs this previous regulation in the year about half a billion euros, it could be significantly more: The threat of US President Donald Trump is: 20 or even 25 percent – the EU would probably follow suit.

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In the rest of the German economy, the turmoil over the Beijing-Washington dispute is growing, as there are dependencies everywhere: charts with arrows indicating goods flow around the world are also hanging in corporate headquarters in other industries. Volker Treier, foreign trade chief of the German Chamber of Industry and Commerce (DIHK), revealed on Friday what is at stake: “German companies have invested more than 80 billion euros in China, and almost 400 billion euros in the US.” In both economic areas, almost one million employees work in German companies. “Many local companies are directly affected by the tariffs, for example, because they source raw materials and components from the other country,” Treier explained.

A particular problem could come to Deutsche Telekom. CEO Tim Höttges wants to merge the American subsidiary T-Mobile US with its competitor Sprint, making it one of the largest mobile operators in the United States. Because of the commercial dispute, there are now apparently disagreements. Washington is said to be writing a letter from congressmen who see the intense association of Sprint owner, Japanese technology firm Softbank, with Chinese network outfitter Huawei, as a national security risk. Now, a thorough review of the proposed merger is required. A government audit could still break the deal.