EU Offers to Cut Tariffs on U.S. Cars, Boosting European Auto Stocks
(Bloomberg) -- European automotive stocks jumped, with BMW AG touching an 11-week high, after the European Union’s top trade official said the bloc is willing to include cars among U.S. industrial goods that could be imported duty free.
“We are willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same,” Trade Commissioner Cecilia Malmstrom told European Parliament lawmakers Thursday at a committee meeting in Brussels. Autos were previously excluded from the discussions that focused on manufactured products bought and sold between the two markets. Removing tariffs “would be good for us economically and good for them -- mutually beneficial.”
Even though Malmstrom’s comments go beyond a joint EU-U.S. statement on July 25 that said the two sides would work toward eliminating tariffs on “non-auto industrial goods,” the bloc already had expressed a willingness to cut levies on cars and car parts among all major automobile-exporting countries, according to an official.
“While nothing is certain, this rhetoric sounds a little more like ‘free-trade’ than it does ‘trade-war,”’ Northern Trust Capital Markets said in a research note. “Is the market positioned for that?”
Vehicle makers and suppliers are the third-worst performing sector this year on the wider Stoxx Europe 600 index of the region’s most valuable companies. The index jumped 1.1 percent on Thursday after Malmstrom’s comments. Automotive manufacturers have been plagued by global trade-war concerns as well as by tightening EU emissions rules that are adding to the cost of developing and testing vehicles. BMW rose as much as 1.8 percent to 86.75 euros, the highest since June 15 while Fiat Chrysler Automobiles NV was at a one-month high in Milan.
The EU will eventually raise the subject of car tariffs in talks with the U.S., a person familiar with the matter said. The bloc is expected to seek a limited free-trade agreement on industrial goods and for such an agreement to be possible, cars would need to be included, the person said.
The EU’s willingness to scrap tariffs would help address U.S. President Donald Trump’s criticism of a lopsided levy system that had prompted him to threaten import charges of as much as 25 percent. Such a move, hurting producers like Volkswagen AG’s Porsche and Audi nameplates that don’t have U.S. production, would raise the sticker price on cars shipped from the EU by about 10,000 euros ($11,700), according to estimates by the European Commission.
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