Volvo's CEO hopes all vehicle tariffs are wiped out, a possible win for Trump

Nathan Bomey | USA TODAY

Show Caption Hide Caption Volvo announces move to make all cars electric or hybrid by 2019 It's a major shake up for the auto industry. Angeli Kakade (@angelikakade) has the story.

The head of at least one major automaker is backing the notion of total elimination of auto tariffs, a move sure to catch the attention of the Trump administration as it threatens tariffs on imported cars.

Volvo CEO Håkan Samuelsson told USA TODAY in an interview Wednesday that he supports a policy of no tariffs on vehicles between the U.S. and Europe or China. And Volvo truly is a global player: a Swedish brand owned by a Chinese company that is preparing to open its first U.S. plant this fall.

Elimination of auto tariffs would be "good for the industry and good for the U.S.," Samuelsson said.

Meanwhile, German automakers BMW, Volkswagen and Mercedes maker Daimler are ready to support ending all car tariffs between Europe and the U.S., "The Wall Street Journal" reported Wednesday.

Samuelsson's comments come amid concerns of a trade war as President Donald Trump threatens increased tariffs on imported vehicles, a development that has set off alarms in Europe and China.

Trump imposed 25 percent tariffs on vehicles imported from China, of which there are few. Chinese sales of U.S.-made vehicles totaled about 266,657 in 2017, according to LMC Automotive.

China, which is lowering most global vehicle tariffs from 25 percent to 15 percent, is set to retaliate by raising U.S.-imported vehicle tariffs to 40 percent on July 6. That will hurt companies that make vehicles in the U.S. for export to China – most notably BMW and its X5 and X6 SUVs, the Mercedes GLE and GLS SUVs, Ford's Lincoln models and electric-car maker Tesla, according to UBS auto analyst Colin Langan.

Europe tacks on a 10 percent tariff on cars from the U.S., while the U.S. imposes a 2.5 percent tariff on European-made cars and 25 percent on light trucks.

Taken together, these developments suggest that foreign automakers with limited U.S. operations are seriously concerned that Trump's tariff threats could hurt their sales and profits.

BMW, VW and Daimler each assemble some cars in the U.S., but American-made vehicles represent well less than half of their sales here, according to Barclays.

Volvo is opening its first U.S. factory, a $1.1 billion plant in Charleston, South Carolina, in a serendipitous stroke that will help partially insulate the automaker from the threat of tariffs.

The Chinese-owned Swedish automaker plans to have 1,500 workers at the plant by the end of 2018 and eventually expects to locate about 4,000 jobs there. At full capacity, the 2.3 million-square-foot Charleston plant will be capable of making 150,000 vehicles per year. Production starts in the fall.

The automaker will initially make the S60 sedan at the facility. In 2021, the plant will also begin assembling the Volvo XC90 SUV. Once it's making both models, the plant will ship about half of its vehicles to foreign markets, Samuelsson said.

With tariff threats reverberating around the world, Samuelsson acknowledged that Volvo's timing was excellent. And he said he's glad he didn't locate the plant in Mexico, which could be subject to tariffs if NAFTA talks fail to deliver a tariff-free compromise.

"If we would have no factory here, we would, of course, be even more nervous," Samuelsson said.

To be sure, Volvo would further benefit from the elimination of tariffs. The company currently exports cars from Europe and China to the U.S.

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Construction on Volvo's South Carolina plant started in 2015, long before any serious threats of tariffs bolstering the economic incentive of assembling vehicles in the U.S.

But the benefits of making cars in the U.S. already were taking shape when Volvo initially set its signs on South Carolina. Global automakers are increasingly making vehicles in the markets where they sell them because it allows them to minimize shipping costs and avoid foreign currency volatility.

"This is not just a factory to build cars for the U.S. This is also a factory which will build cars which will be sold in Europe, Sweden and in China," Samuelsson said.

There's still a risk that cars exported from the U.S. to foreign markets, such as the S60, could be hit by tariffs in China or elsewhere, as foreign trading partners respond to Trump's moves.

The plant's completion is believed to mark the first new major automotive assembly plant to open in the U.S. since Volkswagen launched its only U.S. factory in Chattanooga, Tennessee, in 2011.

It also marks the continued expansion of South Carolina's auto industry. The state already has a BMW plant in Spartanburg and is getting a Mercedes-Benz van factory in North Charleston.

Automakers have been attracted to the state's low-tax environment and low-cost labor.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.