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Greenville Business Magazine

Will Trump's Reported German Auto Ban Hurt Upstate?

Jun 03, 2018 09:11AM ● By Chris Haire
Since it's 2017, none of us should be surprised when a social media parody account inserts itself into an important national policy issue.

Last week, Twitter user Woody Whitehurst voiced his opinion on President Trump's reportedly gestating plan to ban all German auto imports.

"This seems important to those of us who live near the GIANT BMW ASSEMBLY PLANT IN SOUTH CAROLINA," Whitehurst initially wrote.

The Woody Whitehurst handle was inspired by Charlie Whitehurst, the quarterback for Clemson University from 2002-'05 and a man who has become one of the sports world's most famous memes, "Clipboard Jesus." 

Following that initial post, Woody Whitehurst issued a more earnest one: "So to be clear, BMW exports something like 70% of the X vehicles made in SC. Retaliatory tariffs would be devastating to SC."

Actually, the number is much higher than 70 percent.

According to 
BMW, nearly "87 percent of these Sports Activity Vehicles and Coupes were exported through the Port of Charleston with an export value of approximately $8.76 billion." 

In 2017, BMW exported 272,346 X models from its Spartanburg plant, while producing 1,400 vehicles a day. 

Because of their success, BMW "will invest an additional $600 million in the Spartanburg plant from 2018 through 2021 to support manufacturing infrastructure for future generations of X models. An additional 1,000 jobs will also be added through 2021."

Whitehurst isn't alone in his worry that Trump's actions could negatively impact South Carolina. 

Scott Baier, an economist at Clemson University specializing in trade agreements, thinks Trump's anti-import moves could hurt Palmetto State pocket books, but in ways that aren't so readily apparent. 

"The direct impact on BMW will not be that dramatic, just because the tariffs will only be levied on import cars," " Baier says. "But the indirect impact could be quite large."

Baier thinks that that the resulting increase in costs could cause members of the auto industry to go outside their normal supply chains to seek cheaper goods. 

Furthermore, Trump's tariffs as a whole have created an environment of uncertainty that may spook manufacturers.

"Imagine any firm trying to forecast what they want to do four or five years down the road," Baier says, adding that auto suppliers may seek more stable environs in Canada or Mexico.

Baier also not that a resulting trade war could result in higher tariffs on American-made goods, which in turn could impact jobs in the U.S.

First reported by the German magazine WirtschaftsWoche, and then picked up by CNBC, the news sent ripples across the Upstate and the nation. Some cast doubt on the German magazine's claim while others worried that this such a ban would lead the economy down a road not worth taking.

Two weeks ago, the Commerce Department began an investigation of the import auto industry as matter of national security under section 232 of the 1962 Trade Expansion Act. The thinking: a reliance on imported vehicles over homegrown ones places the U.S. in a dangerous position.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” says U.S. Secretary of Commerce Wilbur Ross. 

According to the Commerce Department, "The investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security as defined in Section 232."

The Auto Alliance, a trade organization of which BMW is a member, says the Section 232 investigation is is unnecessary.

"This investigation under Section 232 is a process that has rarely been used and traditionally has not focused on finished products," a statement from the organization reads. "We are confident that vehicle imports do not pose a national security risk to the U.S."

The Auto Alliance adds, "Last year, 13 domestic and international automakers manufactured nearly 12 million vehicles in the U.S. The auto sector remains the leading exporter of manufactured goods in our country. 

"During the last 25 years, 15 new manufacturing plants have been launched in the U.S. – resulting in the creation of an additional 50,000 direct and 350,000 indirect auto jobs throughout America – and new plants are on the way.  

"We urge the Administration to support policies that remove barriers to free tra,de and we will continue to work with them and provide input to achieve that goal."

Interestingly, all major auto manufacturers, including domestic companies, import foreign-made vehicles into the U.S. 

Bloomberg notes that Ford is expected to import 19 percent of their vehicles in 2018, Chevrolet 39 percent, GMC 38 percent, and Dodge 86 percent. BMW and Mercedes are at 65 percent and 58 percent, respectively. 

"One of the things we’ve seen happen play out is the one thing that tariffs do is they can save jobs in certain industries," Baier says. But while Trump's tariffs may help the U.S. steel or aluminum industries, they may hurt industries dependent on cheaper foreign-made goods. "Tariffs don’t really support increased employment overall."