Trump whiffs on BMW and global trade

“The Germans are bad, very bad … See the millions of cars they are selling in the U.S.? Terrible. We will stop this.” Donald Trump behind closed doors according to German publication Der Spiegel.

The Washington Post: “In a January interview with the European press, Trump called out German corporate titans including BMW, warning that they may face fat tariffs on U.S. imports should they keep building cars in Mexico.” 

What?

What is President Trump talking about? 

Where is BMW’s largest plant in the world? 

{mosads}In Germany? No. Where has BMW invested more than $6 billion? In Germany? No. Where has BMW invested $1 billion in 2016 alone? In Germany? No. Does BMW sell “millions of cars” in the U.S.? No. Does BMW flood the U.S. with cars made in Mexico? No. Is it true that BMW America is the largest car exporter from the U.S.? Yes.

Just the facts…

In the same year that the President George H. W. Bush-negotiated NAFTA was given birth by the United States Congress (1993), German “luxury” auto maker BMW announced its first American factory.

NAFTA’s car rules prompted BMW to build an American factory. No longer would BMW pay duty to enter the American car market. 

NAFTA required 62 percent local origin parts and labor to qualify for no duties. By building cars in NAFTA countries (Mexico, the U.S. and Canada) the company’s bottom line benefited immensely.

BMW moved into Spartanburg, S.C., where it invested over $6 billion and hired 8,000 Americans. The Spartanburg BMW plant is the company’s largest in the world.

In 2016 — workers at the plant built 400,000 units and exported 280,000 of them around the world. The Spartanburg plant has exported $10 billion worth of cars. 

So, do the Germans sell “millions” of cars in the U.S.? Is that why we “suffered” a $63 billion trade deficit with Europe’s biggest trading country? 

That is part of it but not included in the deficit are cars BMW made in Spartanburg and Mexico. Cars made in Spartanburg and Mexico are NAFTA cars, not German cars. 

Speaking of BMW in Mexico, it’s opening a new factory in in San Luis Potosi. Its goal — 150,000 cars-a-year. Another NAFTA/Mexican industrial triumph. So reports “Mexico News Daily.”

Unlike Spartanburg’s distance from most of the American auto industry, this Mexican BMW plant joins a rapidly expanding auto industry that depends on a NAFTA supply chain that stretches from Canada — south to Puebla, Mexico, where Volkswagens are made.

Supply chains are important words in the auto industry. Suffice it to say that without the supply chains of parts like engine blocks, bumpers, air bags, transmissions, tires, batteries and thousands of other parts in NAFTA’s tri-patriate auto industry (Canada, the U.S. and Mexico), the American car industry might have disappeared for lack of global competitiveness.

Supply chains are as important as wages in car manufacturing. So are markets.

Most of Mexico’s car production (more than 80 percent) is built for the U.S. market, thus BMW’s Mexico business model should target the U.S. market; not so.

“Mexico News Daily” — “Part of (BMW’s) confidence in the future stems from the fact that while other automotive manufacturers set up shop in Mexico aiming for the United States market, BMW planned for its San Luis Potosí plant to produce for the global market.”

Mexico has 45 trade agreements, twice that of the U.S. 

Mexico’s BMW can easily export to over 100 countries it cannot under German or American trade agreements.

The new plant will employ 1500 employees and tangentially affect 10,000 more workers in Mexico, the U.S and Canada. BMW has agreements with 180 NAFTA suppliers, 45 in the state of San Luis Potosi. Supplies have been contracted for with 20 international firms building new facilities in Mexico.

Spartanburg uses 270 NAFTA suppliers with 40 in South Carolina.

The Mexican factory is slated to make 150,000 units this year making it BMW’s third largest plant. That is two slots below, you guessed it, Spartanburg, with 450,000 units this year.

Trump has notified Congress he intends to renegotiate NAFTA. Do his negotiators know these facts? BMW hopes so. They also wish they could sell “millions of cars” in the United States.

Fact: German Mercedes, BMW and Volkswagen sold 1,043,366 cars in the U.S.A. in 2016. According to “The Truth About Cars” publication, 28 percent or a little less than 300,000 of them were made in the U.S. The remaining 700,000 or so were made in Mexico and Germany.

That is far from the “millions of cars” claimed by Trump. Just the facts, sir, just the facts. 

Raoul Lowery Contreras is the author of The Mexican Border: Immigration, War and A Trillion Dollars in Trade and Murder in the Mountains: War Crime at Khojaly, both published by Floricanto Press and his work was formerly distributed by The New York Times Syndicate.

The views expressed by contributors are their own and are not the views of The Hill.