German carmakers dismayed as US weighs auto tariffs

VW Golfs are loaded in a delivery tower at the plant of German carmaker Volkswagen in Germany. (Reuters)
Updated 24 May 2018
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German carmakers dismayed as US weighs auto tariffs

  • US Commerce Department mulls tariffs on car imports
  • “One-sided protectionism has never helped anyone in the long term," says Volkswagen

FRANKFURT: German automakers reacted with dismay Thursday as the US Commerce Department said tariffs on car imports could be on the horizon, potentially opening a new front in a burgeoning transatlantic trade conflict.
“One-sided protectionism has never helped anyone in the long term. Only free and fair trade secures increased prosperity,” a spokesman for industry behemoth Volkswagen told AFP.
American Commerce Secretary Wilbur Ross had announced Wednesday he had initiated a so-called Section 232 investigation on auto trade — which would provide the legal basis to impose tariffs, if his department finds imports threaten US national security — after speaking with President Donald Trump on the matter.
Ross promised “a thorough, fair, and transparent investigation into whether (auto) imports are weakening our internal economy and may impair the national security.”
The move comes as a June 1 deadline approaches for the White House to decide whether imports from the EU will remain exempt from border taxes slapped on steel and aluminum.
Trump’s recourse to national security arguments for potential tariffs echoes his justification for the metals duties.
In a separate statement released by the White House, the president said “core industries such as automobiles and automotive parts are critical to our strength as a nation.”
Germany’s Federation of the Automotive Industry (VDA) noted that German carmakers employ some 36,500 people in the US and car parts producers 80,000 more.
And it highlighted German firms’ “significant contribution to the American balance of trade in cars” with their exports to third countries.
“An increase in tariff barriers should be avoided,” the body said, saying it had “always spoken out in favor of mutual reductions in tariffs and for free-trade agreements.”
German carmakers exported 494,000 vehicles to the US last year, the VDA said, while the Chambers of Commerce and Industry (DIHK) calculated autos and parts accounted for €28.6 billion ($33.6 billion) of Germany’s €111.5 billion in exports to the US.
Shares in Volkswagen, high-end BMW and Mercedes-Benz maker Daimler were among the worst performers in the DAX index of blue-chip German shares just before midday (1100 GMT) Thursday.
Imposing car tariffs would open yet another front in the Republican president’s confrontational rows over trade that have drawn global outcry from allies and partners.
“Evidence of significant economic damage due to the trade conflict is mounting,” tweeted economist Marcel Fratzscher of the DIW think-tank in Berlin.
“The Trump administration now adding new threats with tariffs on European cars could make things a lot worse.”
The latest announcement comes as negotiations with Canada and Mexico over revamping the continent-wide North American Free Trade Agreement (NAFTA) have stalled over auto demands.
Trump had earlier blamed the US neighbors to the north and south for being “difficult” in talks to renegotiate the pact.
The contrast with a Thursday visit by German Chancellor Angela Merkel to Chinese premier Li Qeqiang could not have been starker.
“China and Germany are on the path of promoting multilateralism and bolstering free trade,” Merkel said in Beijing.
Meanwhile Japan’s trade minister Hiroshige Seko said Thursday that car tariffs would “plunge the world market into confusion” and be “extremely regrettable.”
Passenger cars make up around 30 percent of Japan’s total exports to the United States and Tokyo has already threatened Washington with retaliation at the World Trade Organization for the steel tariffs.
The Wall Street Journal reported earlier Wednesday that Trump was asking for vehicle import tariffs as high as 25 percent.
That would move US policy in the opposite direction from China, where President Xi Jinping recently offered to cut border taxes to 15 percent from 25 percent.
In its statement announcing the inquiry, the Commerce Department cited figures showing that US employment in automobile manufacturing had dropped by 22 percent from 1990 to 2017.
“After many decades of losing your jobs to other countries, you have waited long enough!” Trump wrote in a tweet addressed to “our great American autoworkers.”
Trump — whose protectionist platform helped launch him to the White House — has repeatedly floated the notion of steep tariffs that would shield the US auto industry.
He has specifically targeted Germany, and argued that American cars are slapped with higher tariffs than those imposed on European autos.
US cars sold in the EU are hit with 10 percent duties, while the US imposes just 2.5 percent on cars from the EU.
But Washington imposes 25 percent tariffs on European pick-ups and trucks — which the EU taxes at a much lower 14 percent on average.


Egypt inks deal with Cyprus for power link to Europe

Updated 23 May 2019
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Egypt inks deal with Cyprus for power link to Europe

  • It is estimated the project will take 36 months to implement from the start of construction, with the lowest point 3,000 meters below sea-level
  • Phase 1 will see the interconnector carry a capacity of 1,000 MW which can be upgraded to 2,000 MW at a later stage

NICOSIA: Egypt has signed a deal with a Cypriot firm to lay a 310-kilometer (195-mile) cable under the Mediterranean to export electricity to Europe, the company said on Thursday.
Nicosia-based EuroAfrica described the deal, worth an estimated two billion euros, as a “landmark.”
“Cyprus now becomes a major hub for the transmission of electricity from Africa to Europe,” said company chairman Ioannis Kasoulides.
It is estimated the project will take 36 months to implement from the start of construction, with the lowest point 3,000 meters below sea-level.
Phase 1 will see the interconnector carry a capacity of 1,000 MW which can be upgraded to 2,000 MW at a later stage.
“The national electricity grid of Egypt will be linked to the European electricity system through Cyprus and will contribute to energy security,” Kasoulides said.
Following the crises in Crimea and eastern Ukraine, the EU has been keen to develop alternative sources of energy to reduce its dependence on imports from Russia.
In the past year, gas has started flowing from four major new fields off Egypt’s Mediterranean coast, and output is already sufficient to meet domestic needs.
The Arab world’s most populous country is now seeking to develop the infrastructure to export its newfound energy wealth, both as liquefied natural gas and as electricity.
Egypt is also seeking to import gas from fields off Cyprus and Israel to boost the profitability of the new liquefaction and export facilities it is developing on its Mediterranean coast.
In September, Egypt signed a deal with Cyprus to build an undersea pipeline to pump Cypriot offshore gas to Egypt for processing for export to Europe.
The plans have led to closer eastern Mediterranean ties, with Cyprus, Egypt, Greece and Israel holding regular high-level meetings.