◼ ECONOMICS Bloomberg Businessweek September 30, 201929THEBOTTOMLINE Trump’sthreattorolloutnewtariffscould
halt an expansion at an Airbus plant in Alabama and endanger
investments at a Mercedes factory in the state.The Trade Wars Come
To Alabama
Jimmy Lyons ought to be sleeping soundly. Business
is good at the port in Mobile, which he oversees as
chief executive officer of the Alabama State Port
Authority. European aviation giant Airbus SE is
expanding a plant nearby that relies on the port for
shipments of critical parts. And near Tuscaloosa,
a 3½-hour drive north, things are humming at a
Mercedes-Benz plant, which is one reason the port
authority is building a new auto export facility.
But Lyons has plenty to worry about. Alabama
may have avoided the wrath of Hurricane Dorian
in September (despite President Trump’s forecasts),
but the trade wars threaten to bring a severe eco-
nomic storm down on the state. “The thing that
keeps me up at night is a global recession,” says
Lyons. “I’ve seen what it can do to our business. It
dips very quickly and comes back very slowly.”
The conflict with China has already caused a col-
lapse in grain exports from Mobile. A slowdown in
the global economy would hit outbound shipments
of metallurgical coal that account for 12 million of
the 28 million tons of goods that pass through the
port annually. But what looms largest in Alabama
these days is the possibility that Trump will open a
new European front in his global trade wars.
In early October, the Trump administration
is expected to roll out tariffs on imports from the
European Union. The duties are being authorized by
the World Trade Organization, which in 2018 ruled
in the U.S.’s favor in a long-running dispute over ille-
gal subsidies for Airbus. (The WTO is expected to
announce as soon as Sept. 30 that it will allow the
U.S. to apply tariffs on nearly $8 billion in imports
from the EU.) Then in November the president
faces a self-imposed deadline to decide whether
to go ahead with auto tariffs that would target big
European carmakers such as Mercedes, which has
been making vehicles in Alabama since the 1990s.
Trump has called the EU “worse than China”
when it comes to its trade relationship with the U.S.
Through July the U.S. had a $103 billion trade defi-
cit in goods with the EU, with cars and auto parts
making up a big chunk of that. Duties on Airbus’s
imports of fuselages, landing gear, and other com-
ponents made in Europe would also go some way● Home to Airbus and Mercedes plants, the state
has a lot to lose from a new round of tariffstoward addressing the trade imbalance with the EU.
The EU is Alabama’s largest foreign investor.
German companies alone have spent $8.5 billion
since 1999, according to Greg Canfield, the state’s
secretary of commerce—82 German companies
have operations in the state along with 51 French
businesses and more than two dozen based in the
U.K. “Alabama’s economic ties with Europe, and
Germany in particular, trace back decades,” he says.
Democratic Senator Doug Jones says the Trump
administration’s threat of auto duties is already put-
ting a damper on investment. But he’s more worried
about what would happen in a state that’s become
home to a growing number of auto assembly plants
if they actually were put in place. The tariffs “are not
going to cause all these plants to close. But they are
not going to be able to expand,” he says. “And the
same is true with Airbus.”
Airbus’s plant in Mobile turns out A320 planes at
a rate of five a month. Its output is expected to dou-
ble by 2023 with the addition of a production line for
the A220 model, a move that will bring at least 600
jobs with it. If, that is, the trade wars don’t get in the
way. “Any tariffs applied to major components—fuse-
lages, wings—would see an impact to our business
model,” says Daryl Taylor, the Airbus executive in
charge of manufacturing at the Mobile plant. He says
40% of the cost of the planes made there is spent
on avionics, engines, and other parts sourced in the
U.S. The Trump administration has already turned
down a request from the company to exempt from
tariffs sections of the A220 that are made in China.
Mercedes is building a plant near its factory
that will one day supply batteries for the electric
vehicles the German automaker expects to build
there. If Trump goes ahead with his threatened
tariffs on auto parts, that could raise the price of
myriad imported components beyond batteries,
throwing a wrench into Mercedes’s manufactur-
ing strategy. Potentially at risk: some of the 8,000
jobs the automaker and its suppliers have brought
to Alabama. �Shawn DonnanDATA: US CENSUS BUREAU
● Value of Alabama’s
importsin 2018Mexico
$4.2bSouthKorea
4bGermany
3.4bChina
2.8bFrance866m
U.K.719m
Restofworld
10.1b