German Carmakers Jump on Potential U.S.-China Tariff Truce

(Bloomberg) -- BMW AG rallied the most in more than three years after U.S. President Donald Trump said China had agreed to remove painful tariffs on imported American-made cars shipped to the world’s biggest automotive market. Daimler AG and Volkswagen AG also rose sharply.

Key Insights

  • BMW and Daimler, which export sport utility vehicles from U.S. plants to China, stand to be the biggest gainers from a potential reduction of tariffs. Six of the ten best-selling U.S. auto imports to China are made by the two German luxury auto manufacturers.
  • It’s still a tentative announcement. Trump’s late-night tweet didn’t give context, coming shortly after he and Chinese President Xi Jinping agreed on a truce in the trade war. China’s foreign ministry declined to elaborate on any car tariff changes.
  • The U.S.-China trade war adds a 25 percent levy on car imports from the U.S. BMW calculated a 300 million euro ($341 million) hit because of the levies during the second half of 2018, which would double in 2019 if the situation stayed the same.
  • A reduction would help alleviate only one trade concern, given Trump’s threat to raise tariffs on cars coming in from the European Union. The CEOs of Volkswagen, Daimler and BMW are set to meet with the White House on Tuesday to discuss the issue.

Market Reaction

  • BMW rose as much as 7.3 percent, the most since August 2015. It was up 6.1 percent at 9:30 a.m. in local trading, narrowing losses this year to 12 percent. Daimler gained 5.9 percent, and VW -- which doesn’t export any U.S.-made vehicles to China -- advanced 4.7 percent.
  • Suppliers Valeo SA, Faurecia SA and Continental AG all gained 3 percent or more. Chemical and plastics makers that sell into the automotive market also rallied. BASF SE, which makes lubricants and additives, and Covestro AG, which supplies plastic for parts like rear lights, both jumped more than 4 percent.

Get More

  • Trump Says China Will ‘Reduce and Remove’ Car Import Tariffs
German Carmakers Jump on Potential U.S.-China Tariff Truce

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