President Donald Trump has objected to Germany’s trade surplus with the United States, reportedly singling out its auto industry success […]
President Donald Trump has objected to Germany’s trade surplus with the United States, reportedly singling out its auto industry success for criticism. But in South Carolina, an early primary state that helped propel him to the Republican nomination, the Germans aren’t seen as an overseas rival but as a valued economic partner.
Trump tweeted on May 30 about the U.S. trade deficit with Germany: “Very bad for U.S. This will change.” In meetings during his recent trip to Europe, he criticized Germany’s success in selling automobiles in the United States, according to German media reports that the White House has disputed.
In South Carolina, German manufacturing growth is linked directly to the state’s economic success of the past 25 years. The hard-won 1992 deal that spurred BMW to put its first U.S. plant in South Carolina’s Upstate region is considered a watershed moment for the state’s economy, economic and political observers agree.
With all the success of BMW and other German investments by such companies as Robert Bosch Corp. and ZF Transmissions in South Carolina, it would be a major political mistake for Trump and his allies to endanger that with a trade war, according to Bob McAlister, a Columbia public relations consultant who remains well-connected in GOP circles after serving as chief of staff to Gov. Carroll Campbell, who made the deal that brought BMW to the state.
“It would be a blunder of the first order,” McAlister says.“It would be funny if it were not so serious.”
First opened in 1994 and since expanded, the BMW plant employs more than 8,000 and has spurred numerous parts suppliers and other German manufacturers to launch operations in South Carolina. The state features more than 160 German companies doing business in more than 200 locations, according to its Commerce Department.
“It’s been a game-changer,” says economist Doug Woodward of the University of South Carolina, who has studied BMW’s economic impact on the state.
Woodward’s 2014 study put the plant’s share of the gross state product at $2.8 billion and said the company supported 30,777 jobs in the state, directly or indirectly. He currently is updating his study at the behest of BMW and says that the economic impact of the company has grown since the earlier version was published.
In 2014, BMW announced a further $1 billion investment and 800 additional jobs at the plant, which is where BMW makes its X series of sport utility vehicles. About 70 percent of the SUVs made at the plant in Greer, South Carolina, are exported from the U.S., with many headed to Germany itself or to emerging markets such as China.
How integral has BMW become to the South Carolina economy? The state’s Commerce secretary previously served as a top executive at the BMW plant.“South Carolina works hard to provide industries, from every corner of the globe like BMW – which was also the single biggest exporter of vehicles from the U.S., producing more than 400,000 vehicles in its South Carolina plant – with the resources they need to succeed,” Robert M. Hitt III said in a statement.
An auto manufacturing plant such as BMW, with a campus of 5 million square feet, is huge enough. But such plants also attract parts suppliers to locate nearby so their goods can be available quickly. Forty BMW suppliers also operate in the state, adding to the economic impact.
When the company was persuaded to come to South Carolina in the mid-1990s, other industries such as textiles were retrenching and laying off workers, Woodward says. That made BMW vital to keeping the state’s economy afloat, and it has continued to do that with hardly a hiccup even during the Great Recession, Woodward says. Its wages are about 40 percent above the state’s average for manufacturing, amplifying its economic impact, he estimates.
BMW’s investment has helped the state build its own version of an auto industry in South Carolina, with other companies also locating plants here. In the past five years, other German investments in the state include $500 million projects by Mercedes-Benz and Continental Tire, according to the South Carolina Commerce Department.
“It really is the architect of our automotive cluster,” Woodward says about BMW.
The growth of the Germany-South Carolina link continues. From 2011 to 2016, direct German investment of $4.6 billion created more than 10,000 new jobs in the state, according to the state’s Commerce Department. More than 25,000 South Carolinians work at jobs created by German-owned companies, according to the Representative of German Industry and Trade group.
Beyond the jobs that BMW and other German companies have created, the German projects changed the narrative about what was possible in the state, McAlister says. When the deal was made, South Carolina had to persuade convince BMW that it was the right place for its planned U.S. plant, including a deal that offered aggressive incentives if employment numbers were met – and those have been far exceeded.
This growth in the state’s manufacturing base has helped Charleston’s port rank as one of the most active on the East Coast, with almost all of the 287,700 BMWs exported in 2016 being shipped out there.
Given the state’s deep ties to BMW and other German companies, McAlister expects the state’s top political leadership to take united action to head off any trade dispute. The state is well-connected to the administration, McAlister said, noting U.N. Ambassador Nikki Haley and her successor as South Carolina governor, Henry McMaster, who was a key early supporter of Trump in the state’s primary.
With the imprimatur of BMW, the state has attracted other major manufacturers including Volvo and Boeing. Before Boeing agreed to build fuselages for its 787 jet in the Charleston area, it was in contact with BMW to learn more about South Carolina, Woodward says.
It’s hard to imagine those international companies taking a chance on South Carolina if BMW had not made the leap in the 1990s.
“There’s no question that BMW set the stage for what was to come,” McAlister says. “Without them I don’t know where the state would be.”