It’s hard to say that this trade war surprised anyone, as President Donald Trump telegraphed this punch during the campaign.
So some companies have already been planning for this eventuality. However, as the great pugilist Mike Tyson once said, everyone has a plan until they get punched in the mouth.
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Trump stated during a September campaign stop in Savannah, Georgia, that he wanted to give tax breaks to foreign automakers that built plants in the U.S.
“I want German car companies to become American car companies. I want them to build their plants here,” Trump said. “If you don’t make your product here, then you will have to pay a tariff, a very substantial tariff when you send your product into the United States.”
Audi makes first adjustment to new world tariff order
German brand Audi, a Volkswagen subsidiary, made the drastic decision to hold cars that arrived in the U.S. after April 2 in port rather than offload them and have importers pay the 25% tax that has been levied.
Related: Car buyers will be shocked by Canada’s harsh tariff decision
The move affects 37,000 vehicles, enough inventory for about two months of sales, Reuters reported citing a company spokesperson.
Audi did not immediately return TheStreet’s request for comment.
European auto executives are expected to meet with EU President Ursula von der Leyen on Monday to discuss a response to the tariffs.
Last week, Von der Leyen said that the EU has pretty big guns regarding tariffs, and it isn’t afraid to use them against the U.S.
“We do not necessarily want to retaliate. But if it is necessary, we have a strong plan to retaliate, and we will use it,” she said in front of the European Parliament last week.
“We are open to negotiations. We will approach these negotiations from a position of strength… Our objective is a negotiated solution, but of course, if need be, we will protect our interests, our people, and our companies.”
Volkswagen unveils plan to combat tariffs
Volkswagen saw this coming a while ago, so last month, Thomas Schäfer, CEO of Volkswagen passenger cars, said that the company would increase production at its Chattanooga, Tennessee plant.
“We need a little bit more time if we had to do that, but for now, we are watching the situation, and we are doing backup plans for long-term solutions,” Schäfer said during its Brand Group Core Media call on March 13.
Related: Here’s what car buyers can expect from latest auto tariffs
A recent report in the German business publication Handelsblatt suggested that VW would shift some of the production of its U.S.-bound Porsche and Audi cars to the U.S.
The report didn’t say which specific vehicles would be affected, but it did mention that a new South Carolina plant initially meant to produce the new Scout Motors EV brand could be used for Audi production.
The $2 billion plant, located 20 minutes northeast of Columbia, was unveiled in March 2023 and is expected to be completed sometime this year, creating over 4,000 jobs.
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The most popular Audi car in the States in the Q5, which is built in Mexico. All of its remaining models are built outside of North America.
Under the USMCA rules, imported cars crossing into the U.S. from Canada or Mexico must be built with at least 75% of their parts originating in North America (U.S., Canada, or Mexico) to qualify for tariff-free border crossings. Otherwise, they face a 2.5% levy.
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