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Aluminium Specialist AMAG and OEMs Hit by US Punitive Tariffs

| Author / Editor: Svenja Gelowicz / Alexander Stark

The USA imposes punitive tariffs of 25 % on steel imports and ten percent on aluminium imports — the AMAG Group is expecting losses in the mid-single-digit million euro range. Meanwhile, VDA CEO Mattes calls for an "objective discussion".

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The new policy of protectionism proclaimed by the US government is a threat to the world trade and an economical challenge for automotive suppliers.
( Bild: Pixabay / CC0 )

US President Trump has imposed import duties of 25 % on steel and ten percent on aluminium from all countries except Canada and Mexico. The AMAG Group, a supplier of aluminium cast and rolled products, expects losses as a result: For the aluminium specialist, the USA has been an important market for primary aluminium and rolled products for many years. “We have to take note of the decision of the US administration, which from today's perspective will have an impact on this year's business result of AMAG in the mid-single-digit million euro range,” says Helmut Wieser, CEO of AMAG Austria Metall AG.

Due to the punitive tariffs, AMAG expects a negative effect on their profits in the mid-single-digit million euro range in 2018.
Due to the punitive tariffs, AMAG expects a negative effect on their profits in the mid-single-digit million euro range in 2018.
( Source: AMAG Austria Metall AG )

According to AMAG, the company has invested in the expansion of rolling capacities at its Ranshofen site. Part of the planned sales increase amounting to more than 300,000 tons of rolled products included the American market. Altogether, the company expected to sell some 35,000 tons of rolled products in the US in 2018. AMAG also holds a 20 % stake in the Canadian electrolysis plant Alouette. AMAG's production share of approximately 120,000 tons of primary aluminium is exported almost entirely to the USA.

VDA Head Mattes Calls for Level-Headedness

Meanwhile, VDA CEO Bernhard Mattes calls for prudence. “Emotions won’t help, we need a discussion based on facts. The basis for this discussion is outlined in the principles of the World Trade Organization WTO, which is supposed to ensure fair and free trade", says Mattes. A trade war between the United States and Europe must be avoided at any cost: "In a trade war there are no winners, on no side".

Donald Trump Sets Course for Protectionism

Recently, Trump has fueled the trade conflict with the EU by threatening to impose punitive tariff on European cars, alarming one of Germany's most important industrial sectors. In addition to steel and aluminium, the US President also plans to impose punitive tariffs on European cars. Politicians and industry experts warn of the consequences.

Earlier, Trump had announced a 25 % tariff on all steel imports. With these measures, he intends to protect the domestic industry. Aluminium imports are planned to be charged with ten percent. This will make imports into the USA more expensive. According to US Secretary of Commerce Wilbur Ross, it is likely that flat-rate tariffs will be imposed — without exceptions for individual countries. It looks like, the measures will be a rather broad.

Ross rejected criticism that the planned tariffs would lead to job losses in the USA and price increases. “The total amount of tariffs we're putting on is about $ 9 billion a year. That's a fraction of one percent of the economy,” he said. “So the notion that it would destroy a lot of jobs, raise prices, disrupt things is wrong.”

Expected Losses — Especially for Audi and Porsche

According to calculations by industry experts, the VW subsidiaries Audi and Porsche would be particularly affected by punitive tariffs which, unlike the VW core brand, BMW or Daimler, do not have their own plants in the USA. If punitive tariffs are imposed, Volkswagen is expected to lose around five percent of its profits in case exports from the USA are not offset — as is usually the case. In this case, experts at Daimler and BMW calculated a decline of "less than ten percent". The British manufacturer Jaguar Land Rover or the Swedish brand Volvo would be hit harder. The punitive tariffs, however, are a "disaster" for the German industry. Particularly, n the premium segment, car manufacturers are "heavily dependent" on exports, including to the USA.

According to the German Association of the Automotive Industry (VDA), German companies exported a total of 494,000 cars to the USA last year, more than a quarter less than in 2013, with sales in the United States increasing by about one percent to 1.35 million new cars in 2017 compared to the previous year. The market share was 7.9 %, slightly higher than in 2016, and German manufacturers employ 36,500 people in the USA. VDA President Bernhard Mattes warned: "A trade war between the USA and Europe must definitely be avoided. There are only losers in a trade war like this, on all sides."

Trade Partners Threaten Countermeasures

The EU has announced retaliatory measures and wants to increase taxes on Bourbon whiskey or Harley Davidson motorcycles, for example. EU Vice Commission President Jyrki Katainen reiterated the plans: "We cannot accept that the US government tries to compensate for the trade deficit with EU countries through unilateral measures," Katainen told the Handelsblatt (Monday, March 5). Ross was unimpressed. It's only about a volume of "three billion dollars or so," he said. That's a "pretty trivial" sum.

Neighboring countries and important steel suppliers Canada and Mexico also threatened retaliatory measures. Experts warned that steel tariffs jeopardized the re-negotiations between the two countries and the US regarding the North American Free Trade Agreement NAFTA, demanded by Trump. China also announced a reaction. Britain's prime minister Theresa May expressed "deep concern".

“We are on the losing side of almost all trade deals," Trump tweeted in response to ongoing indignation abroad and criticism at home. "Our friends and opponents have taken advantage of the United States for many years.
“We are on the losing side of almost all trade deals," Trump tweeted in response to ongoing indignation abroad and criticism at home. "Our friends and opponents have taken advantage of the United States for many years.
( Source: Donald Trump / Donald Trump / Gage Skidmore / CC BY-SA 2.0 / CC BY-SA 2.0 )

At the same time, economists and business leaders in the USA spoke out and warned that the tariffs could become a boomerang for the president's "America-First" agenda. Representatives of the automobile industry, beverage manufacturers and construction companies fear that their products will become more expensive because the purchase prices for raw materials such as beverage cans could go up. On the other hand, representatives of the steel and aluminium industry in the USA and employee representatives welcomed Trumps' move.

In the USA, 6.5 million people are directly or indirectly employed in the processing of steel and aluminium — but only a few hundred thousand are employed in the production process. According to the Federal Ministry of Economics, the USA is currently importing steel worth $ 24 billion, making it the world's largest importer. Four percent come from Germany. That is why German manufacturers are only marginally affected.

US President Donald Trump remains unimpressed and in early March confirmed his plans for punitive tariffs on steel and aluminium. “We are on the losing side of almost all trade deals," Trump tweeted in response to ongoing indignation abroad and criticism at home. Our friends and enemies have taken advantage of the US for many years. Our Steel and Aluminum industries are dead. Sorry, it's time for a change!

This article was first published by Automobil Industrie

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