US President Donald Trump has signaled a desire to increase tariffs on European automotive imports, spotlighting the complex dynamics of the transatlantic car trade. With millions of European vehicles, including brands like BMW, Mercedes, and Volkswagen, entering the US market, President Trump argues for a reevaluation of trade terms. He points out that while European cars flood American roads, US automakers face challenges in penetrating the European market due to geographical and cultural differences.
The European automotive market presents unique challenges, as described by Jose Asumendi, head of European automotive research at JP Morgan. According to Asumendi, Europe is a demanding landscape for carmakers. President Trump has remarked that Europeans "don't take our cars," attributing this to the narrow, cobbled streets of Italy's ancient towns and cities, which are less accommodating to larger American vehicles.
The global nature of the automotive industry means that manufacturers often prefer to "manufacture close to where the customer is based," as noted by Mike Hawes from the Society of Motor Manufacturers and Traders (SMMT). This strategy aligns with how several European carmakers, like BMW, Mercedes, and Audi, produce their largest models in North America for both local consumption and export back to Europe.
In 2022, 692,334 new EU-made cars were exported to the US, with a total value of €36 billion. Despite the disparities in tariffs—where the EU imposes a 10% tariff on US car imports compared to the 2.5% charged by the US on European vehicles—European carmakers have managed to gain a foothold in the American market. Meanwhile, US manufacturers like Ford have adjusted their strategies in Europe by focusing on electric and commercial vehicles while reducing their presence in more affordable segments.
Ford plans significant restructuring in its European operations, shifting its focus towards electric vehicles. The company aims to cut 800 jobs in the UK and 2,900 in Germany by 2027, marking a 14% reduction in its European workforce of 28,000 employees. This reflects a broader trend among US carmakers to adapt by manufacturing closer to consumers and aligning with regional market demands.
President Trump has already imposed 25% tariffs on steel and aluminum imports, crucial materials for car production. Hampus Engellau highlights that "Mr. Trump is concerned because the terms of trade are not really equal," underscoring the imbalance perceived by US policymakers.
Despite these challenges, European carmakers continue to thrive in the US market. Their success can be attributed to a combination of strategic manufacturing decisions and brand appeal. Andy Palmer remarks that "it's not about trade. It's about investment and collaboration," emphasizing the importance of strategic alliances and investments in navigating the global automotive landscape.
Moreover, Elon Musk's Tesla has established a significant presence in Europe with its factory near Berlin producing Model Y cars specifically for European consumers. This move illustrates how even non-European brands are adapting their strategies to meet local market demands.
In Europe, Chinese electric vehicle imports are gaining ground, posing a competitive challenge to European manufacturers. This further complicates the landscape for carmakers attempting to navigate the region's intricate regulatory and consumer landscapes.
Asumendi notes that "Europeans do like American brands," but competition remains fierce due to the wide variety of options available to consumers. This sentiment is echoed by Andy Palmer who points out that "European customers have no particular objections to American cars," yet practical considerations such as vehicle size and fuel costs remain deterrents. Engellau quips about the challenges posed by Europe's infrastructure and fuel prices: "Try to go around Italy in a big SUV. I've done it, and it's very difficult… They pay per gallon what we pay per liter."