German automakers jump on potential U.S.-China tariff truce

December 3, 2018 11:02 CET

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

BMW and Daimler, which export SUVs 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 automakers.

Trump gave no other details in his late-night tweet, which came shortly after he and Chinese President Xi Jinping agreed to a truce in the trade war during a meeting at the Group of 20 summit in Argentina. In a briefing in Beijing a few hours later, China’s foreign ministry spokesman Geng Shuang declined to comment 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.

BMW shares rose as much as 7.3 percent on Monday, the most since August 2015. They were up 6.1 percent at 9:30 CET, narrowing losses this year to 12 percent. Daimler gained 5.9 percent, and VW — which does not export any U.S.-made vehicles to China — advanced 4.7 percent.

Suppliers Valeo, Faurecia and Continental all gained 3 percent or more. Chemical and plastics makers that sell into the automotive market also rallied. BASF, which makes lubricants and additives, and Covestro, which supplies plastic for parts such as rear lights, both jumped more than 4 percent.

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