Posts Tagged ‘trade’

ECB minutes highlight policymakers’ fears over currency wars — Is the Trump administration was deliberately trying to engage in currency wars?

February 22, 2018

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Claire Jones in Frankfurt
Financial Times (FT)

The extent of European officials’ concerns over the weakness of the dollar was laid bare on Thursday in a set of European Central Bank accounts that highlighted fears that the US administration was deliberately trying to engage in currency wars.
The accounts of the ECB’s January monetary policy vote also reveal that the governing council’s hawks pushed for a change in the bank’s communications, saying economic conditions were now strong enough to drop a commitment to boost the quantitative easing programme in the event of a slowdown.Mario Draghi, ECB president, last month hit out at US Treasury secretary Steven Mnuchin’s claim that a weak dollar was good for the American economy, saying Washington needed to uphold the rules of the international monetary system, which forbid nations from deliberately devaluing their currencies.

Image result for Mario Draghi, photos

Mario Draghi

The remarks were seen as a signal that the US could ditch its strong dollar policy — and in so doing damage euro exports and lower imported inflation. US President Trump has since reaffirmed the strong dollar policy.

The accounts of the January ECB meeting, published on Thursday, show Mr Draghi’s fears were widely shared among the bank’s decision makers. “Concerns were . . . expressed about recent statements in the international arena about exchange rate developments and, more broadly, the overall state of international relations,” the account said. “The importance of adhering to agreed statements on the exchange rate was emphasised.” Those agreements explicitly rule out competitive devaluations.

The volatility in the euro was, the account said, “a source of uncertainty which required monitoring”.

The decline in the greenback following Mr Mnuchin’s remarks led the euro to soar to $1.25 in the days following the January 25 meeting of the ECB. The euro is now trading below $1.23.

The minutes highlighted dissent over the bank’s communications on its policy intentions, an element of what policymakers dub “forward guidance”.

The dissent was over the ECB’s promise to boost QE should economic conditions disappoint or financial conditions worsen.

“Some members expressed a preference for dropping the easing bias regarding the [QE programme] from the governing council’s communication as a tangible reflection of reinforced confidence in a sustained adjustment in the path of inflation,” the account said. “However it was concluded that such an adjustment was premature and not yet justified by the stronger confidence.”

The central bank is now buying €30bn of bonds a month under the €2.5tn QE programme.




U.K. Economy Stays in the Slow Lane as Growth Revised Lower

February 22, 2018


By Fergal O’Brien

 Updated on 
  • Pound weakness has pushed up inflation, hurting consumers
  • Economists say pace of expansion may not improve this year
 Image result for EU flag, british parliament, photos
Credit Suisse’s William Porter and JPMorgan’s Bob Michele react to the slower-than-expected growth.

The U.K. economy expanded less than previously estimated in the fourth quarter as consumers and businesses absorbed faster inflation, keeping the country in the slow lane of global growth.

The 0.4 percent expansion — revised down from 0.5 percent — also left full-year growth below the initial estimate. On an annualized basis, the rate was 1.6 percent in the quarter, compared with a 2.6 percent pace in the U.S.

Household-spending growth slowed in the fourth quarter, business investment was stagnant and exports fell. The pound fell for a fifth day against the dollar and was down 0.2 percent at $1.3884 as of 11:10 a.m. London time. Gilts were little changed, with the 10-year yield at 1.559 percent.

Responding to the detailed report from the Office for National Statistics, John Hawksworth, chief economist at PwC, said the latest numbers don’t change his view and he expects “relatively modest” growth in 2018. At Pantheon Macrcoeconomics, Samuel Tombs said the economy “remains in a fragile state” and stagnant business investment suggests Brexit is “still fostering caution in boardrooms.”

Forecasts compiled by Bloomberg show U.K. expansion is expected to be about 1.5 percent this year. That’s below the rates anticipated for the U.S., euro area, Germany and France.

Part of the economy’s weakness reflects the fallout from the pound’s drop since the vote to leave the EU in 2016. After inflation surged, household spending rose the least in five years in 2017. But there’s also been an upside, with some boost to exports. Trade contributed 0.4 percentage point to growth last year, the first time it’s added to the expansion since 2011.

The merits of depreciation were on debate on Wednesday as Bank of England Governor Mark Carney and fellow policy makers took questions at a Parliament committee. Most agreed that devaluations just make people “poorer,” something that’s reflected in the weaker consumer behavior and retail sales over the past year.

The overhang of Brexit means uncertainty for companies and consumers and downward pressure on demand. Divisions within government aren’t helping the situation, and Prime Minister Theresa May is gathering with her most senior cabinet ministers on Thursday in a bid to end the rift over the EU exit process.

Even with the economy on a weaker growth path, inflation has taken over as the BOE’s primary concern. It’s currently at 3 percent, a full percentage point above target, prompting the central bank to increase its key interest rate in November.

Officials say that more tightening will be needed to keep prices in check, though Carney refused to be drawn on the exact timing of the next hike on Wednesday. Market pricing suggests it could happen as soon as May.

— With assistance by Harumi Ichikura, and Ainhoa Goyeneche

Includes video:

Trump puts America back in Asia

February 22, 2018


By Thitinan Pongsudhirak

Boris Johnson ‘said Brexit was a mess’ during private meeting with German officials

February 21, 2018

Boris Johnson

Friends of Mr Johnson have branded the claims a hatchet job CREDIT: SIMON DAWSON/ PA

By James Crisp and 

Boris Johnson described Brexit as “a mess” during a private meeting with senior German officials, European Union sources have claimed.

Mr Johnson is understood to have been referring to the complex Brexit negotiations rather than the British decision to leave the bloc, which he campaigned for in the referendum.

During unminuted talks in Berlin, the Foreign Secretary is alleged by Brussels sources to have urged the Germans to turn Brexit into an economic opportunity.

However, The Telegraph understands he was rebuffed by the German government, which has repeatedly stood behind Michel Barnier and resisted any attempts to go over the European Union chief Brexit negotiator’s head.

The claims were…

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Betrayal? Boris Johnson labels Brexit ‘a MESS’ in secretive meeting with German officials

BORIS Johnson betrayed his own Brexit campaign by calling it “a mess” in a private meeting with senior German officials, European Union sources have claimed.

boris johnson brexit messGETTY

According to EU sources, Boris Johnson called Brexit “a mess” in a private meeting

The Foreign Secretary is alleged to have urged the Germans to turn Brexit into an economic opportunity during un-minuted discussions in Berlin.

Mr Johnson is understood to have been referring to the continual and complicated Brexit negotiations rather than the vote to leave the EU overall, as he campaigned for the decision in the referendum.

Sources in Brussels say the MP for Uxbridge and South Ruislip was rebuffed by the German government, which has repeatedly stood behind European Union chief Brexit negotiator Michel Barnier and resisted any attempts to go over his head.

The meeting is assumed to have taken place during his November 2016 visit to Berlin or a separate visit in April last year.

The claims have been vehemently denied by his friends, who claimed they were a smear and hatchet job, on Tuesday evening.

One friend of Mr Johnson said: “These old claims will be rightly dismissed as nonsense by anyone sensible. Boris knows Brexit will be a great success and is committed to taking back control of our money, laws and borders.”

On Tuesday, EU diplomats said informal talks had begun of European Union governments demanding the continued free movement of their workers to Britain, after Brexit, as a trade for giving British bankers access to the single market.

They suggested the idea had been floating in Brussels; corridors of power awaiting talks over the future UK-EU relationship and free trade agreement.

The plan came to light after Secretary of State for Exiting the European Union David Davis called for a system of mutual recognition of standards, which would allow market access on both sides, post-Brexit.

At a speech in Vienna, Mr Davis insisted Brexit would not lead to an Anglo-Saxon bonfire of regulations or create a “Mad Max” dystopia.

The commission is currently sticking to the hard line stance that financial services will lose their passport to the single market after 2021’s Brexit transition period.

Brussels also insists freedom of movement must be upheld until the transition period ends.

boris johnson cabinet meeting brexitGETTY

Foreign Secretary Boris Johnson arriving in Downing Street for the weekly cabinet meeting yesterday

A senior EU has suggested any significant deal on financial services is likely to be conditional on a significant form of free movement and include those in lower-paid jobs than banking.

While bankers and the City of London are keen to maintain the status quo, Theresa May would face increased criticism should she compromise Britain’s borders in an exchange.

The EU-27 (or, EU countries sans Britain) demands are expected to come in negotiations over the contentious free trade deal or the treaty governing the UK’s future relationship with the EU.

One EU diplomat said: “If the UK wants a bespoke deal including financial services we need different bespoke redlines. And in that scenario, of course, the question ‘what’s in it for us’ will be asked.”

Another diplomat added: “In line with the EU-27 thinking, being in the single market means respecting all its four freedoms, not just one of them.”

China vows to protect interests as US eyes trade sanctions

February 17, 2018


© AFP/File | China produces about half of the world’s steel but supplies less than two percent of the steel imported by the United States

BEIJING (AFP) – China on Saturday warned it would take necessary measures to protect its interests if the US imposes tough trade sanctions against its steel and aluminium exports.The US Commerce Department on Friday recommended imposing heavy tariffs on China and other countries to counter a global glut in steel and aluminum, laying out an array of possible options in a report to President Donald Trump.

The move gives Trump the opportunity to strike a highly public blow for his “America first” trade policy — he is due to decide on the measures next month — but has stoked fears of retaliation and a trade war between the world’s two largest economies.

“If the United States’ final decision affects China’s interests, we will take necessary measures to defend our rights,” said Wang Hejun, a director at China’s commerce ministry, in a statement responding to the US report.

The US report framed concerns about Chinese overproduction in terms of national security and defence — an approach refuted by Wang.

“The findings of the investigations (of the US Department of Commerce) are groundless and do not correspond to reality,” he said.

Washington “should not lightly adopt restrictive measures under the pretext of ‘national security’ … a vague formula that can easily lead to abuse,” he said.

China produces about half of the world’s steel but supplies less than two percent of the steel imported by the United States.

The US and EU argue Chinese overproduction is heavily subsidised by the state and has depressed world prices, hurting their own domestic production.

Trump on Tuesday accused Beijing of decimating American steel and aluminium industries, saying he was “considering all options”.

China says will protect its interests amid US trade probe on steel, aluminium

February 17, 2018

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China’s Commerce Ministry said it will take necessary steps to protect itself if a final US decision on imposing steep curbs on steel and aluminium imports from China and other countries affects China’s interests. PHOTO: REUTERS


BEIJING (REUTERS) – China’s Commerce Ministry said on Saturday (Feb 17) the country will take necessary steps to protect itself if a final US decision on imposing steep curbs on steel and aluminium imports from China and other countries affects China’s interests.

The ministry added that the US Commerce Department report was “baseless” and did not accord with the facts.

The US Commerce Department has recommended that US President Donald Trump impose steep curbs on steel and aluminum imports from China and other countries ranging from global and country-specific tariffs to broad import quotas, according to proposals released on Friday.

The long-awaited unveiling of Commerce’s “Section 232″national security reviews of the two industries contained global tariff options of at least 24 percent on all steel products from all countries, and at least 7.7 percent on all aluminum products from all countries.

Trump authorised the probes under a 1962 trade law that has not been invoked since 2001. He has until April 11 to announce his decision on steel import curbs and by April 20 to decide on aluminum restrictions.

Commerce Secretary Wilbur Ross emphasised that Trump would have the final say, including on whether to exclude certain countries, such as NATO allies, from any actions.

“The president has the discretion to modify any of these or to come with something totally different,” he told reporters on a conference call.

He said a global tariff would cover every steel and aluminum product entering the American market from China.

China’s Commerce Ministry urged the United States to exercise restraint in using trade protection tools, respect the rules of multilateral trade and make a positive contribution to the international economic and trading order.

“If the final US decision affects China’s interests, China must take necessary measures to protect its own reasonable interests,” the ministry added, without giving details.

Steel stocks soared with US Steel closing up 14.7 percent, AK Steel up 13.7 percent, Nucor ended up 4.5 percent and the broader S&P 1500 steel index 5.3 percent higher.

Century Aluminum shares closed up 8.3 percent, while Alcoa, which has operations across the globe, ended off 0.44 percent.

Alcoa said in a statement the US trade actions should focus on Chinese overcapacity and not penalise nations that abide by the rules.

Ross said he would not be surprised if countries challenged the measures at the World Trade Organization.

He said “there has been no dialing back” of the recommendations due to objections from industries that use steel and aluminum.

“The objective of both reports is to get the production up to a level which will result, in our judgment, in the long term viability of each industry,” Ross said, adding that he did not believe that the recommendations would lead to significant price hikes.

US Senate Democratic leader Chuck Schumer said he hoped the proposals “are the beginning of efforts by this administration to finally get tough on China.”


Alternatively, Commerce recommended a tariff of at least 53 percent on all steel imports from 12 countries – Brazil, China, Costa Rica, Egypt, India, Malaysia, Russia, South Korea, South Africa, Thailand, Turkey and Vietnam.

Other countries would be subject to a quota limiting their tariff-free access equal to their 2017 steel exports to the United States.

The country-specific aluminum option would impose a 23.6 percent tariff on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All others would be subject to quotas equal to their 2017 exports to the United States.

A third option called for Trump to impose global quotas based on 63 percent of each country’s 2017 steel exports and based on 87 percent of their aluminum exports to the United States.

Ross said the remedies were designed to raise U.S. capacity utilization to about 80 percent for each industry, from the current 48 percent in aluminum and 73 percent in steel.

“That is the level we believe would provide the industry with long term viability,” he said.

Some US companies will be able to request exclusions for specific products if the U.S. lacks sufficient domestic capacity or for national security considerations, Ross added.

Philip Bell, president of the Steel Manufacturers Association, welcomed the proposals saying they could be”meaningful and effective” in tackling global excess capacity and relentless steel imports.

But in a joint statement the National Tooling and Machining Association and Precision Metalforming Association said steep tariffs would “devastate” downstream US steel consuming manufacturers, which employ 6.5 million Americans.

“If these tariffs are imposed, the US will become an island of high steel prices resulting in our customers simply importing the finished part and threatening thousands of jobs,” the groups said.

Cowen and Co. analysts Novid Rassouli and Han Zhang told clients in a research note they believe Trump will likely go for more targeted options.

“Utilising a blanket tariff is too broad, in our view,” they said. “There is a higher level of precision needed than a blanket tariff because depending on the product spread, it could for instance knock out one product, and do little to nothing for another.” Trump met with a bipartisan group of US senators and representatives at the White House last week, signaling he would take at least some action to restrict imports of the two metals.

Some US lawmakers and steel and aluminum users have urged caution in any restrictions to avoid disruptions or price spikes in the raw materials, used in everything from autos to appliances and aircraft and construction.


Trump Administration Proposes Stiff Penalties on Steel and Aluminum Imports — Would China Retaliate?

February 17, 2018
Workers at a Nucor steel plant in Huger, S.C., using a crane to lift rolled steel into storage before it is shipped for further processing. The Trump administration wants to impose tariffs on steel imports. Credit Stephen B. Morton for The New York Times

WASHINGTON — The Trump administration for the first time declared imports of steel and aluminum from China and other nations a threat to national security, laying the foundation for President Trump to impose the types of punitive tariffs he has long championed.

In a report released on Friday, the Commerce Department said a recent influx of foreign metals posed a risk to national security by threatening the viability of American manufacturers who make planes, armored vehicles and other products for the military. It outlined an array of recommendations the president could take to help domestic manufacturers struggling to stay competitive, including a sweeping tariff of 24 percent on steel imports from all countries.

The recommendations hand Mr. Trump an opportunity to make good on the get-tough approach to global trade that he has long espoused by giving him authority to decide the scope and severity of any trade action by mid-April. Mr. Trump has previously embraced tariffs on imports of steel and solar products as crucial to protecting American companies.

Yet erecting barriers could prompt swift retaliation from other trading partners, including China and the European Union, which have already warned of reciprocal action in response to protectionist measures. It could also further erode relations with foreign allies that might be ensnared by the measure and drive up prices for American consumers.

Wilbur Ross, the secretary of commerce, outlined three alternatives Mr. Trump could choose from to protect American steel producers, which have struggled to compete with a flood of cheap metals from China and other countries. The options included a broad 24 percent tariff on all steel imports, or a targeted 53 percent tariff on all steel products from 12 countries, including China, Brazil, India, South Korea and Vietnam. Under this option, imports from all other countries would be limited to the level they imported in 2017.

Mr. Ross also proposed an alternative for the steel industry that involved no tariffs, but would set a quota limiting steel imports from all countries to roughly two-thirds the level they were at last year.

For aluminum, the Commerce Department also outlined three alternatives, including a flat 7.7 percent tariff on imports from all countries, or a targeted 23.6 percent tariff on aluminum from China, Hong Kong, Russia, Venezuela and Vietnam. A third option involved putting into effect quotas to limit aluminum imports to lower levels than were shipped to the United States last year.

Mr. Ross did not indicate which way Mr. Trump might go, saying the president could pick a separate path, or reject the penalties altogether. But the president’s longstanding support for tariffs and his recent remarks suggest he is likely to support some kind of action.

In a meeting with lawmakers of both parties on Tuesday, Mr. Trump played down objections to the trade measures, and said that the United States was considering tariffs, quotas or both. “You may have a higher price, but you have jobs,” Mr. Trump told the bipartisan group.

Supporters of the trade action, including American steel companies and the United Steelworkers union, say American metal makers badly need the White House to step in and halt the flood of cheap imports, which has depressed the price for steel and aluminum. Many American steel and aluminum plants are struggling to compete in an oversaturated market and some have had to scale back production and eliminate jobs.

“This is a step in the right direction, and hopefully the president responds sooner than later,” said Todd Leebow, the chief executive of Majestic Steel USA, which buys American-made steel from mills to sell to customers in construction, agriculture and other industries. Mr. Leebow said he had seen a troubling decline in the industry in recent years, and he was hopeful Mr. Trump’s measure might reverse that.

But the investigation has also prompted criticism from American industries that use steel and aluminum to make their products, including automakers and food packagers. These businesses say tariffs or quotas will cause their prices to rise and shrink their profits, and could end up costing American jobs.

Christine McDaniel, a senior research fellow at the Mercatus Center, a think tank that supports free markets, said that for every one steelworker that may be helped by trade restrictions, more than 38 workers in other sectors that could be harmed by it. “There is ample evidence that import taxes will harm economic growth and cost American jobs,” she said.

In a call with reporters on Friday, Mr. Ross played down any negative impact from the trade actions, saying that any increase in the cost of steel and aluminum for products like soft drinks and canned soup would be “trivial.” “We really don’t buy that argument,” Mr. Ross said.

Shares of American steel companies, including United States Steel, Nucor and AK Steel, rose following the release of the report. Stocks of Ford Motor Company and General Motors, which purchase aluminum and steel for their cars, declined.


Steel wire to be used in the manufacturing of tires at the Zhong Tian Steel Group Corporation in Changzhou, Jiangsu. China produces roughly half of the world’s steel and aluminum. CreditKevin Frayer/Getty Images

United Steelworkers, which strongly supported the tariffs, commended Mr. Ross’s announcement. “These recommendations have the potential to focus on the bad actors in the world that historically and systemically cheat in international trade,” said Leo W. Gerard, the president of United Steelworkers International.

Companies with operations outside of the United States were more circumspect. Aluminum companies including Alcoa, Rio Tinto Aluminum and Constellium issued statements urging the administration to exempt Canada, a major supplier of aluminum, from the rule, and focus on the issue of Chinese overcapacity instead.

Mr. Trump will have authority to determine which countries should be subject to any trade action, in part because of way in which the investigation was started. In April, the administration opened an investigation into steel and aluminum imports with a little-used provision of trade law that gives the president broad discretion to act to protect national security.

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Focus on Aluminum:


US eyes heavy tariffs on China, Russia to counter steel, aluminum glut

February 16, 2018


© AFP | US Commerce Secretary Wilbur Ross believes that cheap steel and aluminum imports from places like China and Russia “threaten to impair our national security”

WASHINGTON (AFP) – The US Commerce Department said Friday it recommended imposing tariffs on China, Russia and other countries to counter a global glut in steel and aluminum which it says threatens national security.In a report to President Donald Trump, Commerce Secretary Wilbur Ross includes among the options a nearly 24 percent tariff on all products from China, Russia and three other economies.

Other options would impose either high tariffs or quotas on steel and aluminum imports.

The findings are part of an investigation into the impact of the oversupply of steel and aluminum, and whether it undermines US national security.

In each case “the imports threaten to impair our national security,” Ross told reporters in a conference call about the so-called Section 232 investigation.

China and Russia are primary targets, but many other countries are included in the recommended sanctions, which are sure to spark fears of a global trade war if implemented.

Ross said the sanctions were designed to be broad to prevent targeted countries from circumventing the limits by shipping through a third country.

He said “serial offenders can evade these orders by transshipment through another country.”

For steel, Ross recommended three possible options: a 24 percent tariff on all steel from all countries; a 53 percent tariff on imports from 12 countries, including China, Russia and Brazil; or a quota on steel from all countries.

For aluminum, he recommended either a 7.7 percent tariffs on the metal from all countries; a quota for all countries; or, perhaps the most shocking of all the options, a 23.6 percent tariffs on imports of all products from China, Russia, Hong Kong, Vietnam and Venezuela.

Ross submitted the two reports to the White House in late January.

Trump has until mid-April to decide on any possible action, which he acknowledged likely would prompt action by US trading partners in the World Trade Organization.

US industries have urged the administration to take care since high import tariffs would raise the cost of supplies for major industries.

But Commerce said the goal of the measures is to boost domestic aluminum and steel prodcution.


U.S. Weighs Tariffs and Quotas on Steel, Aluminum Imports

February 16, 2018

Trump administration weighs different options, ranging from a global tariff of at least 24%, to a more targeted approach focusing on China and other nations

The Trump administration on Friday said it was weighing broad-based tariffs and quotas to curb imports of steel and aluminum to protect national security, though officials stressed no final decisions had yet been made and the ultimate policy could be considerably more limited.

The recommendations were part of internal administration reports released Friday laying out the options for President Donald Trump as he considers how to fulfill a campaign promise to take a more aggressive stance than predecessors to shield domestic steel and aluminum makers from growing foreign competition.

The recommendations suggest the president choose among several options. One of them is a global tariff of at least 24% on all steel imports from all countries. Another is a tariff of at least 53% on steel imports from a dozen countries. Under the latter, targeted option, the tariffs of 53% would be applied on steel from Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam.

The report from the Commerce Department also included, as an alternative, a quota on steel products from countries equal to 63% of the countries’ 2017 exports to the U.S.

“I am glad that we were able to provide this analysis and these recommendations to the president,” Commerce Secretary Wilbur Ross said in a statement. “I look forward to his decision on any potential course of action.”

The recommendations are opposed by many lawmakers and businesses who worry that the tariffs risk provoking a trade war and raising prices on a range of domestic products.

The recommendations sent sector stocks soaring Friday. Nucor Corp, the largest U.S. steel producer by sales, rose almost 5% and US Steel Corp and AK Steel Holding Corp gain more than 10%. Aluminum stock reaction more muted, with market leader Alcoa Corp. recently up almost 3% and Arconic Inc up 1.6%, both off earlier highs

Mr. Trump faces an April deadline to decide whether, and how, to restrict imports under little-used section 232 of the 1962 trade law that gives the president wide discretion to impose tariffs and quotas if he deems certain imports pose a national security threat. Mr. Trump launched the studies in a White House ceremony last April with cheering industry and union executives by his side, and he promised at the time dramatic action within weeks.

On aluminum, the Commerce Department recommended global tariffs of at least 7.7% on all aluminum imports, or a tariff of 23.6% on select countries or a quota on imports equal to a maximum of 86.7% of the countries’ 2017 exports to the U.S. Under the second option, which targets individual countries, tariffs would apply to aluminum from China, Hong Kong, Russia, Venezuela and Vietnam.

Write to Jacob M. Schlesinger at and William Mauldin at

Layoffs Arrive in Brexit Britain, and Auto Workers Are Up First — Globalization killing British industry?

February 16, 2018


By Suzi Ring and Christopher Jasper

Follow @Brexit on Twitter, join our Facebook group and sign up to our Brexit Bulletin.

In his 50 years working in Britain’s car industry, John Cooper has survived plenty of upheavals. None is scarier than the prospect of Brexit.

Being split off from their biggest market means the job cuts and production slowdown U.K. carmakers have imposed the past few months could be just a prelude to wholesale shutdowns.

The shock is only beginning to hit. Since October, 650 of Cooper’s colleagues have lost their jobs at the factory where Vauxhall Motors churns out Astra hatchbacks. The remaining 1,200 staff worry the plant may close if the U.K. loses tariff-free access to Europe. Across the River Mersey from Vauxhall’s factory, Jaguar Land Rover is planning production cuts.

“People shouldn’t underestimate the dangers that Brexit’s bringing,” Cooper, a union representative, said outside the sprawling factory in the town of Ellesmere Port, near Liverpool, where he’s worked since he was 18. “Why would Nissan continue to invest in the north east when it’s got a plant in Spain where it can build the same car without a 10 percent tariff?”

If Prime Minister Theresa May gets her way, by next year Britain will start severing ties with the bloc over a transition period, including quitting the customs union it’s been part of since 1973. Whether duties are imposed after that is still up in the air as London and Brussels wrangle over the terms of their divorce.

Tariffs and other hurdles to trade could be disastrous for the automotive industry since parts routinely move across borders several times during the manufacturing process. Take the BMW Mini, manufactured in Oxford. Before reaching the production line, each engine crankshaft is made in France, shipped to BMW’s U.K. engine plant in Hams Hall near Birmingham and then to Steyr, Austria for assembly.

The fate of the Vauxhall plant depends on whether its French parent company, PSA Group, decides to build the next Astra, a 2021 model, there. PSA, which bought Vauxhall from General Motors Co. last summer, has other options: it designs Peugeots and Citroens in France and Opels in Germany and could ship those to Britain with Astra logos.

Foreseeing these risks, Cooper had ardently campaigned against Brexit by canvassing workers at the plant, yet the leave vote still prevailed in the neighboring area—along with most of the other towns where U.K. carmakers operate factories.

Peter Southwood
Photographer: Matthew Lloyd/Bloomberg

“It’s hard to see how anybody could sanely vote for anything that would make the business more difficult,” said Peter Southwood, 44, who’s worked at Vauxhall for 21 years. “They see the cars coming down the line, they see how many are going abroad, they see where the parts come from.”

Southwood’s grandfather and two uncles worked at Ellesmere Port and he hopes his son or daughter might uphold the tradition. But, Brexit or not, employment in Britain’s automobile industry isn’t what it used to be. In the heyday of the 1970s, 12,500 people worked at the Vauxhall plant. Headcount has since fallen 90 percent, largely due to automation.

The EU departure is dealing the industry an additional blow just as it scrambles to adjust to the transition into electric cars and government plans to phase out gas and diesel engines in the coming two decades. After touching a record in 2016, U.K. car sales suffered their biggest annual decline since 2009 last year as Brexit and the Volkswagen diesel emissions scandal tarnished buyer confidence.

Not the Best Time to Buy

New car registrations in Britain fell most last year since the recession of 2009

Source: Society of Motor Manufacturers and Traders

The cost of assembling a car in Britain could increase by 2,372 pounds ($3,337) under a so-called Hard Brexit, where a 10 percent tariff is imposed, according to estimates of London-based PA Consulting. Plant closures are most likely at Japanese-owned Honda Motor Co. and Toyota Motor Corp. since they export most of the cars they make in Britain, it said.

Foreign companies won’t stay “if there is no profitability of continuing operations in the U.K.,” Japan’s ambassador to the U.K., Koji Tsuruoka, said in an interview carried by BBC News this month. “It’s as simple as that. These are high stakes that I think all of us need to keep in mind.”

It will probably be too risky for both sides to let negotiations fall apart without a deal that allows goods to move between borders with few or no tariffs, according to Tim Lawrence, head of manufacturing at PA Consulting. “Britain is Europe’s second-biggest car market and it’s hugely important for EU companies like the German premium manufacturers,” he said.

But talks on trade haven’t even started—and the EU doesn’t expect a full detailed trade deal to be completed until after the U.K. has left.

In and around Ellesmere Port, a nerve center for the industry, workers are understandably anxious.

An Astra hatchback automobile sits in the lot at the Vauxhall Motors plant in Ellesmere Port.
Photographer: Matthew Lloyd/Bloomberg

On a snowy day this month outside Jaguar’s Halewood plant where it makes Range Rover Evoque and Land Rover Discovery Sport SUVs, several workers wearing green sweaters and trousers bearing the signature Jaguar cat logo said they’d been warned not to comment. One man said he’d voted to leave the EU because migrant workers crossing the bloc’s open borders had depressed U.K. wages. “I’m happy to get out of Europe, just not with the way the government have gone about it,” he said.

Another, 50-year-old Brian, was hopeful demand would pick up: “Rich people are still going to buy high-end cars,” he said. Owned by India’s Tata Motors, JLR is more shielded from Brexit because it exports a lot to the U.S. and China and a spokeswoman said new investments are planned at Halewood.

John Cooper
Photographer: Matthew Lloyd/Bloomberg

Vauxhall’s Ellesmere Port site, by contrast, ships eight out of 10 cars to Europe, according to Cooper. He’s lobbying management for new production along with Len McCluskey, the general secretary of Britain’s national Unite union and an ally of opposition Labour Party leader Jeremy Corbyn.

The pair went to Paris last month to try to convince PSA Chief Executive Officer Carlos Tavares to grant two new models to Ellesmere Port. That’s the deal Cooper says is needed to guarantee survival, and both should include electric versions. Tavares hasn’t yet obliged. A Vauxhall spokesman said he couldn’t speculate.

After half a century at the plant, Cooper won’t give up without a fight. Vauxhall is an iconic brand in the U.K., appealing to Britons who want to support local industry and local jobs—something that, ironically, Brexit campaigners said leaving the EU would help safeguard.

“I don’t believe if you put a Vauxhall badge on a Peugeot 308 it would sell it in the same volume,” Cooper said. “I don’t want my legacy to be we didn’t get a car.”

— With assistance by Elisabeth Behrmann, and Hannah Recht