How Trump administration tariffs on China are affecting sales of South Carolina BMWs

Anna B. Mitchell | The Greenville News

Show Caption Hide Caption 2018 South Carolina Automotive Summit Cars are already going autonomous, electric and shared — the question posed by those attending the South Carolina Automotive Summit in Greenville this week is which manufacturers will win as technology and markets face accelerating change.

BMW's Chinese consumers will be the first to feel the brunt of an emerging trade war with the United States, as the German automaker this week announced it must raise prices on South Carolina-made SUVs sold there.

It is the latest in a fight between Washington and Beijing that has ensnared the financial fortunes of both South Carolina and BMW and prompted fears among many top state leaders that jobs could ultimately be affected.

In a statement issued late last week, BMW said the company would figure out new prices soon for Chinese buyers of the X3, X4, X5 and X6 — all currently made at BMW's Greer plant. Meanwhile, on Monday, the German automaker also moved forward with long-standing plans to step up all-electric X3 production in Shenyang, China.

The announcement came as China last Friday started imposing a 40 percent tariff on all American-made cars — including those BMWs in South Carolina — while on July 1 reducing tariffs on car imports from other countries around the world from 25 to 15 percent, according to Die Zeit newspaper in Germany.

More: Tariffs rattle South Carolina's manufacturing supply chain

"BMW China will not be able to completely absorb the duty increase for U.S. imported models," the company said. "We are currently calculating related necessary pricing increases. At present, we will stick to the current MSRPs of the U.S.-imported products."

Chinese market

The Chinese move against American-made cars came in response to tariffs the Trump administration levied on $34 billion worth of Chinese goods on July 6. Another $16 billion in tariffs on China are pending.

More: Trade war: Trump administration threatens China with $200 billion in additional tariffs

More: 5 things South Carolinians should know about the Trump administration's tariffs

Problem is, the Chinese car market is a cornerstone of the Palmetto State's economy, with nearly a third of all BMWs exported from here bound for China

"In 2017, BMW Group exported 81,186 vehicles from our plant in South Carolina to China with an export value of $2.37 billion," BMW wrote in a letter to U.S. Commerce Secretary Wilbur Ross on June 28.

BMWs are popular in China, with 560,000 sold there last year, according to a Monday statement from the automaker. Hundreds of thousands were made in Europe and China, but nearly 14 percent of those Chinese sales were X-model SUVs made in South Carolina

Production increases long planned in China

Some media have reported that BMW has "shifted" production to China as a result of the tariffs, but an increase in production there of the X3 model has been long in the offing, BMW spokesman Kenn Sparks confirmed Wednesday.

BMW had said in its 2017 annual report last spring that it would start making the smaller SUVs at plants in South Africa and China in the first half of 2018.

Sparks said that BMW's plan to expand production and job numbers at its plant in Spartanburg County remains on track. Capacity there is expected to increase from 400,000 vehicles to 450,000 by 2021.

"Spartanburg production is not affected by the additional production in China," Sparks said.

The Chinese plant in Shenyang making the "iX3" electric SUV is a joint venture between BMW and Brilliance Automotive, a Chinese company. There are two BMW joint venture plants in Shenyang, which together will produce 520,000 BMWs in 2019, according to the company.

“Our agreement sets a long-term framework for our future in China - a future involving continued investment, further growth and a clear commitment to the development and production of electric vehicles," BMW Group chairman Harald Krüger said in a statement.

S.C. chamber pleads with lawmakers

President Trump upped the ante on China on Tuesday, saying he's considering yet another $200 billion in tariffs on Chinese goods — including consumer products such as vacuum cleaners and baseball gloves, according to the Associated Press.

"Consumers will feel it, and perhaps as early as Christmas," said Mary Lovely, an economics professor at Syracuse University who studies trade

Following on the heels of the U.S. Chamber of Commerce, the South Carolina Chamber of Commerce joined the anti-tariff chorus on Tuesday with a letter to the state's congressional delegation. In it, the chamber pointed out that 600,000 jobs in the state are tied to the state's billions of dollars in exported goods.

Graham and Scott waiting it out

The letter urges lawmakers to push back against the Trump administration's tariffs.

"We cannot negatively impact some of our best corporate citizens, strongest international allies and most reliable trade partners and expect anything other than lost jobs and company closures that reverse the economic development progress we have celebrated over the last decade," the letter says.

Sens. Lindsey Graham and Tim Scott of South Carolina have opted to support the president, voting with the 11-senator minority on Wednesday against a largely symbolic Senate resolution that called for Congress to step up its a role when the president invokes "national security" in his imposition of tariffs.

Both senators said they wanted to let the president's tough negotiating strategy play out some more.

Trump is using national security as a justification for tariffs on steel and aluminum and is considering the same for proposed tariffs on cars and car parts. The latter will be reviewed in hearings next week.

Governor jittery

With more tariffs looming, one of President Donald Trump's staunchest supporters, Gov. Henry McMaster, broke his silence on the trade war early Wednesday while visiting a Japanese chemical plant, Showa Denko, in Ridgeville.

"I understand what the president is trying to do, and I support that because he wants to see that we have fair trade around the country," McMaster said.

But, the governor added, he has reached out to Trump and Ross in recent weeks to make a case against tariffs because of their impact on South Carolina's international manufacturing community. South Carolina's economy, he noted, is more reliant on manufacturing and exports than other states.

"I’m going to do all that I can, and I know that other business and industry leaders are doing the same thing, to see that South Carolina and our businesses and our people at those companies are not negatively hurt by tariffs, taxes and anything else that comes out of Washington," McMaster said.

Tariffs becoming a state election issue

Speaking Wednesday in Greer, McMaster's political opponent, Democratic gubernatorial candidate James Smith, said the governor has been too quiet for too long on these "job-killing tariffs." McMaster last openly challenged the president in January when he spoke out against a tariff on washing machines that hurt Samsung, which has a plant in Newberry.

"South Carolina deserves a governor who will fight for all of us," Smith said. "The relationship that is often touted by our governor between him and the president is something of great value. Well the only value it seems to be is for him to get re-elected, winning his primary."

The Associated Press contributed to this report.