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When Zero Is Better Than Twenty

05 July 2018 by lberuti

The US ambassador to Germany, Richard Grenell, met German carmakers yesterday, with the message that he had been mandated by the White House to help find a solution on tariffs with the EU. German companies advocate the cancellation of tariffs on passenger vehicles between the EU and the US. Currently, a vehicle exported to the US is taxed at 2.5% to 4%, while a vehicle imported from the US is taxed at 10%. The US is fighting for more balanced duties. However, a commonly held opinion is that European consumers do not buy US vehicles because they do not fit their requirements (size, fuel consumption, poor fit to European driving conditions), not because of high duties. Mr Trump threatened last month to impose a 20-percent import tariff on all EU-assembled vehicles. It certainly had the potential to upend the industry’s current business model for selling cars in the United States, and it had weighted on car manufacturers’ risk premia. An end to the tariffs between US and Europe could put an end to the dispute, with no loser. Investors breathed a sigh of relief and made autos the best performing group today.