BMW Says Tariffs Will Cost Firm More Than $1 Billion

BMW Chief Executive Oliver Zipse tells Bloomberg that tariffs from both the United States and the EU were hitting the automaker’s bottom line.

BMW headquarters in Munich, Germany, on May 14, 2021. AP Photo/Matthias Schrader, File

BMW said on Friday that it expected tariffs to hit the company to the tune of €1 billion ($1.09 billion) this year as Brussels and Washington continue to fall out over trade.

The Bavarian carmaker is squarely in the firing line of the escalating transatlantic trade spat.

BMW CEO Oliver Zipse said the company expected the loss to its 2025 earnings from the newly imposed U.S. tariffs and European Union duties on its China-made electric vehicles.

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“We don’t think that all these tariffs will last very long, though some of them might last longer,” Zipse said in a Bloomberg interview on Friday, adding that, despite the estimated $1.09 billion cost, the company was “quite safe.”

He described the firm’s estimate as conservative and said executives did not expect all the tariffs imposed so far to remain in place for the whole year.

BMW, one of the world’s most iconic motoring manufacturers, reported a 37 percent drop in profits for last year.

The automaker is already facing duties on vehicles it produces at its plant in Mexico for export to the United States.

Although President Donald Trump has postponed the tariffs for companies in compliance with the USMCA trade deal, BMW falls short of the rules.

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At the same time, the German giant is being whacked by European Union tariffs on vehicles imported from China, where its Mini subsidiary brand produces an electric car and an SUV.

BMW has joined Chinese firms in legally challenging the levies.

“If you overdo it with tariffs, it sends a negative spiral to all market participants,” Zipse said. There are “no winners in that game.”

Trump has increased tariffs on U.S. steel and aluminum imports and threatened more tariffs on the EU, which he labeled “hostile and abusive.”

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In response, the EU has vowed to retaliate while simultaneously calling for a dialogue to begin.

EU trade chief Maros Sefcovic is due to speak with U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer on Friday afternoon.

Ahead of that meeting, Lutnick signaled that next month’s U.S. tariffs could be imposed on cars from all countries, including South Korea, Japan, and Germany.

Meanwhile, French finance minister Eric Lombard said that a trade war between the EU and the United States would be “idiotic,” and that the 27-country bloc would respond in kind to further tariffs.

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In a sign the uncertainty around the tariffs may already be taking its toll, the UK economy contracted unexpectedly in January, extending a run of stop-start data that have caused problems for the Labour government’s attempts to encourage growth. 

Unlike the EU, Britain has refrained from announcing tit-for-tat levies against the United States after Trump’s steel and aluminum tariffs came into force on Wednesday.

Late on Thursday, German central bank chief Joachim Nagel described Trump’s policies as “a horror show” that could tip Germany into recession, while he and his opposite number in Paris warned the trade war would rebound on the American economy.

“It’s a shock for the world economy, but even more so for the American economy. It’s firstly a tragedy for the American economy,” French central bank governor Francois Villeroy de Galhau said. 

European Central Bank President Christine Lagarde agreed that a full-scale global trade war would particularly hurt the United States, but said it could reenergize Europe’s push for unity.

Reuters contributed to this report.