One of Donald Trump’s goals upon his return to the White House is to place the United States at the head of global manufacturing production, a throne currently occupied by China. In addition to the acceleration of its industrial production, Beijing has managed to improve the quality of its products, turning the ‘made in china‘ in an expression of reliability and efficiency, as seen in its domain of electric car manufacturing. The tycoon wants to strengthen American economic hegemony in the world, and to do so he is willing to activate a tariff cluster bomb whose fragments will also reach the Old Continent. With the German economy at half throttle and France going through political turbulence, Europe watches as the Republican plans to take the jewels of the continental automotive industry to American soil.
At the end of September, Donald Trump stated at a rally in Georgia, a key state with important industrial centers, that he wanted to “turning German car companies into American firms“.” “I want them to build their plants here,” said the then-Republican candidate, indicating that foreign firms that refused to manufacture their products in the United States would face a “considerable tariff.” If this roadmap were executed, the magnate would deal a hard blow to the German economy, which is going through a very difficult time, with the automotive industry in the doldrums.
Although at the moment he has not directly mentioned Europe, there are reasons for concern in the Old Continent. Not just because Trump has stated that the word tariff is “music” to your earsbut because the new American president has indicated that the first thing he will do upon arriving at the White House will be to establish tariffs on products from China, Canada and Mexico. Specifically, the magnate plans to impose a 10% rate on Chinese products, and 25% on products manufactured in Canada and Mexico.
The imposition of these rates on goods produced in these last two countries could annul the free trade agreement between the US, Canada and Mexico (USMCA), promoted in the previous term of Trump himself, and which replaced the American Free Trade Agreement. of the North (NAFTA). Such a move would confirm Washington’s turn with its trade allies, setting off alarm bells in Europe, specifically in Germany.
Thus, the German titans of the automotive industry such as Volkswagen, Mercedes-Benz and BMW have communicated profit warnings in recent months, pointing out as the main causes the economic weakness and the slowdown in demand in China, the country with the largest automobile market in the world. In this sense, Mercedes-Benz also cut its financial forecasts in September, and Volkswagen announced that same month its plan to close factories in Germany for the first time in its 87-year history.
In this scenario, Rico Luman, an economist at ING, has indicated that the German automobile sector is significantly exposed to Trump’s tariff threats. Germany is the largest exporter of passenger cars to the USsales that rose to 23,000 million euros (24,200 million dollars) in 2023. They also account for 15% of all German exports to US territory.
According to Luman, the automotive sector constitutes the “heart” of the manufacturing industrysince it is linked to the steel and chemical sector, also involving the entire supply chain. For this reason, Berlin looks with concern to the other side of the Atlantic, at a critical moment in political terms, with legislative elections on the horizon and the extreme right on the rise.
Actually, Donald Trump intends to repeat with Europe the same move that Reagan executed with Japan in the 1980s. In 1980, after decades of extraordinary development of the automotive industry, Tokyo overtook Washington as the world’s largest automobile producer. Furthermore, during that period Japanese firms achieved water American highways with their vehicles, in a context of global oil crisis and in the midst of the US recession. In other words, Japanese cars began to eat the American combustion pie.
The situation was critical for the US automotive sector, so much so that some congressmen claimed that Japan was exporting unemployment to the United States. Thus, in 1981, Ronald Reagan, champion of neoliberalism, got Japan to “voluntarily” limit vehicle exports up to a volume of 1.6 million units annually, a restriction that ended in 1994. This allowed the US sector to recover and reach 10 billion dollars in profits in 1984. Furthermore, the following year the Plaza Accord was signed, through which the yen appreciated 32% against the dollar, which affected Japanese exports. This caused numerous Japanese automobile companies to settle in the United States with the aim of producing there.
It remains to be known the exact degree to which Trump’s tariff policy will develop, and to what extent it will affect Europe. On the other hand, it is worth remembering that the tycoon is a great opponent of electric cars, the direction towards which the future of the automotive industry is heading. They know this well in China, which accounts for 60% of global electric car sales, but also in the EU. Brussels has a roadmap that, for the moment, maintains the objective of banning the sale of combustion cars in 2035. Given the deterioration of the European automotive industry, authoritative voices such as that of Mario Draghi have risen to demand greater coordination that allows the Old Continent to increase its competitiveness in the current international context.
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