UK (Commonwealth) _ Europe‘s already struggling auto industry is preparing for more challenges as Donald Trump gets ready to take office on January 20. The next U.S. president may impose new tariffs.
In one of his first acts as president, Trump has promised to put significant new taxes on goods coming from Canada, Mexico, and China. This threat has the potential to spark trade wars.
For European automakers, who have already witnessed a drop in sales and manufacture in major countries like the US and China, this is troubling news.
Western automakers have been steadily losing market share in China as a result of the rise of Chinese firms like EV leader BYD. Volkswagen is particularly struggling with dwindling sales.
Many European manufacturers are facing a dismal future due to increased pressure from Trump, dwindling domestic sales, and more competitive competition from China.
Leading European automakers like Volkswagen, Volvo, and Stellantis, the conglomerate that makes Fiat, Chrysler, and Citroen, would be severely impacted by the proposed levies, as would the Central and Eastern European nations whose economies largely depend on the production of these vehicles.
According to Toma Savic, a former director of Zastava, a Serbian multinational automaker that shut down in 2008, the taxes would be especially detrimental to business operations.
He warned that this will unavoidably result in enormous layoffs and a reduction in European manufacturing. Stellantis owns Fiat Chrysler Automobiles Serbia, which was formerly known as Zastava.
Fiat Chrysler Automobiles Serbia, based in Kragujevac, central Serbia, had already been having difficulty regaining its position in the European auto sector before Yugoslavia broke up in the early 1990s. At that time, the company was assembling 200,000 cars a year and exporting them to 26 other nations.
Given that Europe’s greatest economy is by far the region’s largest exporter of passenger automobiles to the United States, the German auto industry is likewise expected to be extremely sensitive to Trump’s projected tariffs.
According to some projections, the US could impose import taxes on Canada, Mexico, and Europe.
Trump attacked the European Union during the campaign trail earlier this year, accusing European allies of unfair trade practices and stealing American industrial jobs, even though Europe was not particularly mentioned in his initial tariff announcement in late November.
During the October campaign trail, Trump declared, “They don’t take our cars, they don’t take our farm products, they don’t take anything.” “They will have to pay a heavy price.”
The primary market for European passenger automobiles is the United States. According to Statista, a German online platform that specializes in data collection and presentation, exports totaled $42.5 billion in 2023.
In contrast, over the same time period, the value of U.S. automobile imports to the EU was around $7.8 billion. On the September campaign trail, Trump declared his desire for German automakers to “build their plants here” and transform into “American car companies.”
He went on to say that in order to get more businesses to establish manufacturing within the United States, he was willing to provide low taxes and energy expenses. By increasing production in the United States, German automakers were able to evade the 35 percent tariffs that Trump had proposed in 2016.
However, the extra tariffs that Trump has suggested may make it more expensive for European automakers to establish factories in the United States.
As the European car industry attempts to compete for the future electric vehicle (EV) market, which is dominated by Chinese manufacturers, the fear of more tariffs will compound the already mounting strains on the sector.
The EU levied up to 35% tariffs on Chinese EVs earlier this year, claiming that the “unfairly subsidized” vehicles had allowed them to gain market share. In addition, EV sales have decreased throughout the EU, and several governments have eliminated subsidies designed to encourage people to purchase the vehicles.
Fiat Chrysler Automobiles Serbia is struggling with low demand back in Kragujevac, where a number of fully electric vehicles have been completely delayed or are being built at a dismal rate. According to Jugoslav Ristic, a longtime union official in Serbia’s auto industry, “customs wars and unfavorable business conditions” are to blame for the setbacks.
There is also worry that if Brussels reacts to potential U.S. penalties, the industry would suffer much more from a trade dispute. A situation like this might raise prices for consumers in the US and Europe, especially in Germany, the continent’s largest automaker.