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The Trade War Is Officially On

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Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the stories you need to know.

1st Gear: Oh It’s ON

Since President Deals couldn’t get a Deal done with China by today, the United States and the Chinese governments have hit each other with $34 billion worth of tariffs, and China is calling the biggest trade war in history, Reuters reports:

The United States and China slapped tit-for-tat duties on $34 billion worth of each other’s imports on Friday, with Beijing accusing Washington of triggering the “largest-scale trade war” as the world’s two biggest economies sharply escalated their conflict.


What does this mean for you, the American Consumer? First, it means that if you’re in the business of manufacturing things for export to China, like cars or soybeans, but very much cars, you’re a bit screwed. Secondly, it means that a few things are going to get more expensive. But you don’t care about that, because you have no money to begin with.


What you care about is the factory in town re-opening. And yes, there is hope. Maybe, just maybe, the factory will re-open in a few years.

You will not work there. You have already been replaced by a robot.

2nd Gear: And The Looming Trade War With Europe Doesn’t Look Any Rosier

But if you thought making a Deal with China is tough, then surely striking an agreement with European countries will be even tougher as the second front of the trade war creeps ever closer. But thankfully we have President Deals at the helm, ready to negotiate this toughie that the Wall Street Journal points out:

The problem is that any deal would need to be agreed at the European level—a challenge when it would mainly benefit Germany.

Among European nations, Germany runs the largest trade surplus with the U.S., thanks to the popularity among Americans for car brands like BMW, Mercedes, Audi and Porsche. France runs a surplus, too, but cars are one product it doesn’t ship across the Atlantic. This will make a trade deal specifically focused on cars hard to sell in Paris—and, by extension, in Brussels.

Another problem: The EU is unlikely to deviate from World Trade Organization rules. These explicitly bar countries from signing bilateral deals covering only specific sectors.

In short, China should be an easier nut to crack, as it’s pretty much just a singular dictatorship. But Europe, and more specifically the European Union, is a democracy made up of smaller democracies. That means a lot of moving parts and people to satisfy in any modifications to the trade agreements we already have. And if deadlines aren’t met, then get ready for your Audis, BMWs, Jaguars, Land Rovers, Mercedeses, Volvos, Volkswagens, Fiats, Alfa Romeos, Ferraris, Lamborghinis, Minis, and Porsches all getting wildly expensive. If they don’t pull out of the United States altogether.

But as we noted yesterday, a lot of this may hinge on the European Union just conceding the point entirely, as the current deal we have imposes 10 percent tariffs on American cars, while the United States imposes 2.5 percent tariffs on European cars and the awful Chicken Tax.


And there’s an incentive for the E.U. to do so. It’s not like Europeans really want American cars anyway, as they don’t have the streets for a Chevrolet Silverado, and they don’t have the plastic tolerance for a Cadillac. So if they just give up the 10 percent tariff, they might be able to avoid a trade war entirely.

Also, maybe it’ll finally be the death of the Chicken Tax. Volkswagen Amarok, here we come.


3rd Gear: But Nobody’s Chancing It

Even with President Deals steering this ship, however, automakers appear not to be confident, for some strange reason, that the negotiations will go well. Reuters says that car imports have surged lately as manufacturers rush to get cars physically into the United States before the inevitable trade war with Europe:

In the United States, the ports of Baltimore, Jacksonville, Florida; and Brunswick, Georgia - the three leading U.S. ports for importing automobiles - in May unloaded a combined 23,000 more cars than they did a year earlier. Auto exports out of Baltimore and Jacksonville that month were up 39 percent and 19 percent, respectively, port officials said.

At the port of Long Beach, whose auto customers include Toyota Motor Corp (7203.T) and also Daimler AG (DAIGn.DE)’s Mercedes-Benz, vehicle imports were up 3.4 percent in May, but exports were down 24 percent at 1,679 units.


Remember, these cars are being shipped in because cars aren’t selling any more. They’re just piling up, as once the trade war hits, anyone left out in the rain will be screwed as well.

4th Gear: Volkswagen Loses (Again) On Dieselgate

Hello, it is the month of July in the year 2018. Dieselgate is still ongoing. Volkswagen still wants to keep as much of it a secret as it can, but German courts ruled that it cannot, Bloomberg reports:

Volkswagen AG lost a suit at Germany’s top court seeking to ban Munich prosecutors from using a report they seized from Jones Day, the U.S. law firm the carmaker hired to investigate the roots of its diesel-emissions scandal.

The Federal Constitutional Court in Karlsruhe ruled that under German law the attorney-client privilege, which protects the work of a lawyer for a client, only bans prosecutors from seizing documents if the lawyer is working for a suspect in a criminal case.

As the Munich probe targets VW’s Audi unit and not VW, the seizure was legitimate, the court said. It also said that VW couldn’t object to the raids because Jones Day’s premises weren’t its own.


Truly, on this day we weep for these poor, persecuted Volkswagen executives.

Hopefully we’ll all see the report soon.

5th Gear: Nissan And Mercedes Are Calling It Quits, Again

Nissan and Mercedes called it quits on their joint development deal 18 months ago. But now they’re calling it quits on their joint development deal... again. Nissan is making noises about it being hopeful, but the story from Automotive News doesn’t sound great:

Nissan says it is still committed to cooperating with Daimler following a report it has suspended joint development of a luxury compact car amid an uncertain U.S. market outlook.

The Japanese automaker’s Infiniti premium brand decided to halt development of the vehicle because of the dramatic shift in U.S. demand away from passenger cars and toward light trucks, according to a July 6 report in Japan’s Nikkan Kogyo business daily.

Nissan Motor Co. was also concerned about uncertainties in the outlook for tariffs, the newspaper said.


Will no one think of the Lincoln MKC competitors????

Reverse: This Was So Long Ago No One Was Even Alive Then

The great Argentine race car driver Juan Manuel Fangio, winner of five Formula One driver’s world championships, competes in his last Grand Prix race–the French Grand Prix held outside Reims, France–on this day in 1958.


Neutral: The Trade Federation Has Destroyed All That We Have Worked So Hard To Build

If we do not act quickly, will all be lost forever?