The danger for German auto makers of the US’s tough new trade policy, aimed in part at protecting US car makers at home and helping them abroad, is overstated, says Scope Ratings. Weak global demand is a bigger risk.

“Investors are right to be on alert, but the impact on its own of threatened US import tariffs would likely be modest on German auto makers,” says Scope Ratings analyst Werner Stäblein.

“More of a concern for the industry at large is sluggish growth that Scope forecasts at 0-1% in global demand this year—an international trade war would hardly help,” Stäblein says.

Possible new US tariffs on foreign car imports, which the Trump administration is considering on grounds of national security, need to be put into perspective because the large and vibrant US market is less important than it used to be for foreign auto makers, the consequence of surging growth in China. BMW and Daimler’s Mercedes-Benz derived around 14% of total sales from the US last year compared with 24% and 26% for China. The gap is even wider for VW at 6% against 42%. The three manufacturers derived 41%-45% of sales from Europe.

Second, applying national labels to cars when discussing trade is a tricky business. BMW’s Spartanburg plant in South Carolina was the biggest US automotive exporting facility by value in 2017, shipping overseas some 70% or around 260,000 of the more than 371,000 SUVs and coupes produced. BMW’s US sales of 306,000 were consequently only partially satisfied by imports. Mercedes-Benz, which discloses fewer production figures, is likely in a similar position.

Third, global automotive supply chains are so complex that import tariffs on cars are a blunt instrument. Spartanburg is the place of final assembly for BMW’s X-series range of SUVs, but their engines are made at a factory in Munich, Germany, “exported” to the US and then “re-imported” in to Germany or “re-exported” to other markets like China in the form of the finished vehicle.

Fourth, a luxury car maker like BMW might be able to pass on some of the cost of a 25% import tariff to US consumers, considering it could add less than USD 100 to monthly leasing expenses.

Even if some auto makers gain at the expense of others in the US, the loss in volumes would be modest for German manufacturers, says Stäblein. “The bigger concern for the rating and credit quality of car makers is what is happening to volumes overall,” with sales growth slowing in China, demand shrinking in the US, and Europe showing modest growth.