Good sign: Merkel Ready To Back Lower EU Tariffs On U.S. Cars

German Chancellor Angela Merkel said  she would back a lowering of EU tariffs on U.S. car imports, responding to an offer from Washington to abandon threats to impose levies on European cars in return for concessions. Merkel said any such measures would require the European Union to also lower tariffs on cars imported from countries other than the United States, otherwise the plan would not be conform to World Trade Organization rules.“When we want to negotiate tariffs, on cars for example, we need a common European position and we are still working on it,” Merkel said. “I would be ready to support negotiations on reducing tariffs but we would not be able to do this only with the U.S.

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No tariffs, no barriers, no subsidies ! That is the way to go ! Business must be finally global... 

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That was quick, but it doesn't mean win or lose..It could be just goodwill

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Merkel is worried about Germany, as she should be. But American car manufacturers can pick up the slack. All she has to do is lower the tariffs on U.S. cars

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Why not? How many European would buy an American car in the first place. Ford, GM, Chrysler...are you kidding? The only reason they would, the poor ones, if they are much cheaper than comparable Euro cars. Those who have visited there recently saw their beautiful cars.

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European Mustang and Corvette fans will like this :)

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Current U.S. import tariff rates on cars are 2.5 percent and on trucks 25 percent. The EU has a 10 percent levy on car imports from the United States. 

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Merkel is No 1 leader in Europe, same as Germany in EU.So simple. Strongest are choosing  rules.

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That 10% EU duty is aimed at Japanese, Korean, and lately Chinese autos, not big American road cruisers, which have limited appeal and limited buyers in the EU.  First, they use much more gas, and second, they are impossible to park in town.  It is a bit like the market for the Rolls, also very limited.  Meanwhile, the Koreans are a serious market competitor to VW, and VW is a vast manufacturer all through Europe  (I recall they even bought the Czech Skoda), and for that size company  (and don't forget Fiat and their production of small cars), the Europeans want to create some wall to an onslaught of Korean models, built with much lower cost labor. 

So there is the real dilemma: if that duty for the US cars is off, then it is also off for the Asians.  And the Asians remain formidable competitors. Given the number of jobs involved, no European government is going to go to a zero-tariff position.  And that's the rub. 

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"German Chancellor Angela Merkel said  she would back a lowering of EU tariffs on U.S. car imports" and this is a very reasonable position; but the result would be more German demand satisfied from many other auto manufacturing countries, as their duty would be similarly reduced. The American car sales are not limited by the 10% duty, but by the lack of fit to the European market. The accompanying reduction in US prices would be an incentive to increase the US purchases of cheaper German cars, and more significantly undercut the US production. Keep in mind that the US car producers have indicated they plan to phase out car production anyways.

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8 hours ago, Jan van Eck said:

That 10% EU duty is aimed at Japanese, Korean, and lately Chinese autos, not big American road cruisers, which have limited appeal and limited buyers in the EU.  First, they use much more gas, and second, they are impossible to park in town.  It is a bit like the market for the Rolls, also very limited.  Meanwhile, the Koreans are a serious market competitor to VW, and VW is a vast manufacturer all through Europe  (I recall they even bought the Czech Skoda), and for that size company  (and don't forget Fiat and their production of small cars), the Europeans want to create some wall to an onslaught of Korean models, built with much lower cost labor.  

So there is the real dilemma: if that duty for the US cars is off, then it is also off for the Asians.  And the Asians remain formidable competitors. Given the number of jobs involved, no European government is going to go to a zero-tariff position.  And that's the rub.  

 

2 hours ago, bjomejag said:

"German Chancellor Angela Merkel said  she would back a lowering of EU tariffs on U.S. car imports" and this is a very reasonable position; but the result would be more German demand satisfied from many other auto manufacturing countries, as their duty would be similarly reduced. The American car sales are not limited by the 10% duty, but by the lack of fit to the European market. The accompanying reduction in US prices would be an incentive to increase the US purchases of cheaper German cars, and more significantly undercut the US production. Keep in mind that the US car producers have indicated they plan to phase out car production anyways.

Automation is slowly picking away the labor component of vehicle cost.  There may be a point where energy, raw material, infrastructure, tax, and regulatory costs are the deciding factor - and in those collectively, I'd bet the US has an advantage over Asia.  Against Europe, I'd bet we have an advantage in every category.  That being the case, is it possible automakers would eventually start manufacturing small cars in the US for export to foreign markets?  Alternatively, is it possible more globally-sold designs would be manufactured in the US, just as BMW already does?

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14 minutes ago, mthebold said:

 

Automation is slowly picking away the labor component of vehicle cost.  There may be a point where energy, raw material, infrastructure, tax, and regulatory costs are the deciding factor - and in those collectively, I'd bet the US has an advantage over Asia.  Against Europe, I'd bet we have an advantage in every category.  That being the case, is it possible automakers would eventually start manufacturing small cars in the US for export to foreign markets?  Alternatively, is it possible more globally-sold designs would be manufactured in the US, just as BMW already does?

Probably not.  For that to work, you would have to dump a ton of Regulations set in concrete by bureaucrats.  For example, cars sold in the USA require "passive restraints"  [known as air bags] and Tire Pressure Monitor ["TPM"] systems, where there is some little transmitter inside the wheel that sends a radio signal to the computers stuck in the dash, and a back-up camera, and anybody who cannot back up without a silly back-up camera is totally incompetent.  Builders here for markets outside the US would thus either have to add in all the gadgets, at some expense, or build two separate fleets of cars, and be unable to cross-sell from the inventory.  That gets expensive fast. 

Donald's man in Transportation would have to use a buzz saw to chop away at the CFR's, and fire buildings full of bureaucrats, and the odds of all that is pretty much zero. Welcome to America, bureaucracy style.

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8 minutes ago, Jan van Eck said:

Probably not.  For that to work, you would have to dump a ton of Regulations set in concrete by bureaucrats.  For example, cars sold in the USA require "passive restraints"  [known as air bags] and Tire Pressure Monitor ["TPM"] systems, where there is some little transmitter inside the wheel that sends a radio signal to the computers stuck in the dash, and a back-up camera, and anybody who cannot back up without a silly back-up camera is totally incompetent.  Builders here for markets outside the US would thus either have to add in all the gadgets, at some expense, or build two separate fleets of cars, and be unable to cross-sell from the inventory.  That gets expensive fast. 

Donald's man in Transportation would have to use a buzz saw to chop away at the CFR's, and fire buildings full of bureaucrats, and the odds of all that is pretty much zero. Welcome to America, bureaucracy style. 

Wow.  I didn't know backup cameras were mandatory; sounds like the sort of thing that may have been lucrative for a handful of political donors.

As for the expense, the vast majority of your car components would still be identical, and final assembly already handles a myriad of options.  Would it not be cheaper to have one plant with a slightly-more-complex final assembly than to have two completely separate plants? 

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4 minutes ago, mthebold said:

Wow.  I didn't know backup cameras were mandatory; sounds like the sort of thing that may have been lucrative for a handful of political donors.

As for the expense, the vast majority of your car components would still be identical, and final assembly already handles a myriad of options.  Would it not be cheaper to have one plant with a slightly-more-complex final assembly than to have two completely separate plants? 

I dunno.   Outside my area of expertise. 

Just guessing, if you have these internals including ECU modules and there are no inputs from missing sensors, will that car run?  Probably not.  Cars have gotten seriously complex.  The easier solution is for some intelligent Secretary of Transportation to eliminate the CFRs,  that is what I would have done, simplify it all, but hey, I did not take that job, the Congressman from Illinois did, so there you go. 

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(edited)

14 minutes ago, Jan van Eck said:

I dunno.   Outside my area of expertise. 

Just guessing, if you have these internals including ECU modules and there are no inputs from missing sensors, will that car run?  Probably not.  Cars have gotten seriously complex.  The easier solution is for some intelligent Secretary of Transportation to eliminate the CFRs,  that is what I would have done, simplify it all, but hey, I did not take that job, the Congressman from Illinois did, so there you go.  

There's plenty of computer memory available in modern cars.  You could design one computer hardware package, tell it which options that specific vehicle is supposed to have, and write the code to automatically check for hardware. 

We know different sensor packages were being handled as far back as the early 2000's because the mk4 Volkswagen Jetta (1999-2004) has an optional traction control package that reads a pressure sensor on the brake master cylinder.  If your car has the traction control package, then the master cylinder has the pressure sensor.  If not, then not.  I doubt they wrote separate software packages - much less designed separate hardware - to handle something that could be checked with a few lines of code. 

I might want to double check the mk4 options though.  They may have refreshed the design when they switched engines from the ALH to the BEW... regardless, from a technical point of view, handling different sensors should be straightforward. 

Edited by mthebold
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