BMW said on Monday that it will add production of some of its SUVs in China and increase prices on vehicles built in its Spartanburg, South Carolina, plant sold in China, according to a report from The Post and Courier.
A BMW spokesman told Motor Authority on Monday that the German automaker is adding X3 production in China, and said that "production levels at BMW Plant Spartanburg are not affected."
The move comes in response to a 40-percent tariff on SUVs built in the U.S. levied by China. China's tariffs were retaliation for tariffs imposed by President Donald Trump on $34 billion worth of Chinese products.
China said Trump was starting “the biggest trade war in economic history,” and accused him of bullying with his trade tactics. In addition to SUVs, China placed tariffs on American soy beans and seafood.
BMW signed an agreement with Chinese partner Brilliance Automotive Group Holdings to up the number of vehicles produced in China to 520,000 by 2019, according to the paper. BMW makes the X3, X4, X5, and X6 in South Carolina, where it employs 10,000 people. Both BMW and the report have not said that vehicles other than the X3 will be built in China.
Earlier on Monday, BMW announced that the iX3, essentially a battery-electric version of the X3, would be built in China and exported around the world as part of the 520,000 vehicles to be produced in the country by 2019. BMW-owned Mini will also produce electric vehicles in China.
The news of BMW's move comes while the Trump administration studies the effect on U.S. national security of imports of European cars, SUVs, vans, light trucks, and automotive parts. Should the administration determine European auto imports pose a national security risk, Trump is set to impose a tariff on them.
Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!— Donald J. Trump (@realDonaldTrump) June 23, 2018
The Department of Commerce will hold a public hearing on the investigation on July 19 and 20 in Washington, D.C.
BMW had previously written a letter to U.S. Commerce Secretary Wilbur Ross stating that "the domestic manufacture of automobiles has no apparent correlation with U.S. national security," according to a Business Insider report. BMW went on to say that the U.S. enacting tariffs would increase the cost of exporting cars from the U.S., "potentially leading to strongly reduced export volumes and negative effects on investment and employment in the United States."
The European Union has warned that such a move could endanger $300 billion in commerce. A study by the Peterson Institute for International Economics said the move would hike auto prices, threaten spending on autonomous cars, and cost up to 195,000 jobs in the U.S. over three years and up to 624,000 jobs if other countries were to retaliate.
Editor's note: This article has been updated to reflect comments from BMW USA stating that China will add production rather than move it, and to add quotes from BMW's letter to Commerce Secretary Wilbur Ross.