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Volvo altering global production plans amid U.S.-China trade war

by Drew Johnson

Volvo is being forced to have a total re-think.

Auto tariffs put into place by the United States and Chinese governments are forcing Volvo to reshuffle its global manufacturing operations, just months after the company opened its first production plant in the United States.

Just weeks ago Volvo opened a new production facility outside of Charleston, South Carolina, with the intent of shipping some S60 sedans made there to China. However, new trade tariffs have made that plan financially infeasible, so Volvo has canceled plans to export U.S.-made S60s to China.

Additionally, Volvo will stop importing the XC60 SUV from China. Instead, Volvo will import XC60s from Europe. The company also says it will drastically reduce the number of S90 sedans it imports to the U.S. from China, but there are no current plans to stop shipments completely.

Volvo was planning to export roughly half of the S60s made in South Carolina to China. However, that plant will now focus on the American market, with some South Carolina-built sedans making their way to Europe. Volvo has not announced how the production shift will impact overall output at the plant.

"We'll go at this change not with a smile, but we know what we need to do,” Anders Gustafsson, head of Volvo's U.S. operations, said, according to Bloomberg. "We have a global manufacturing structure that helps us maneuver in these tough waters.”

Volvo, owned by China's Geely, is particularly susceptible to the trade feud between the United States and China. Because of its Chinese ownership, Volvo exports more vehicles from China to the United States than other automakers. Moreover, Volvo built its new U.S. plant specifically to ship some vehicles back to China, which is looking evermore difficult.

"We are absorbing the tariffs, and that really is what you saw in our financial results,” Gustafsson. "But we can, under no circumstances, absorb tariffs in the long run. It's huge.”

The U.S. currently imposes tariffs of 27.5 percent of vehicles imported from China. Going the other way things are even worse, with China implementing a 40 percent tax on all U.S.-made vehicles.

Beginning in 2022 Volvo was planning to build its XC90 in Charleston for export to China, but that project might have to be shelved if the trade dispute isn't put to bed.

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