EU Unilateral Auto Tariff Offer To U.S. Might Shelter Its Car Makers – Forbes

The European Union is reportedly ready to slash tariffs on U.S. auto imports to the same level charged on its exports in a move that would generate huge sighs of relief from investors.

This would be especially timely because manufacturers like Porsche are reviving investment in internal combustion engine vehicles as electric vehicle sales falter. The only large market remaining in the world for ICE vehicles is the U.S. To be cut off from that market would be financially disastrous for the Europeans.

A former U.S. ambassador to the EU though expects the Trump Administration to seek huge overall changes to long-term unfair trading including non-tariff barriers.

Currently, the U.S. has a 2.5% tariff on Europe’s sedan and SUV imports, while the EU charges U.S. imports at 10%.

The Financial Times said the EU wants to cut tariffs on U.S. auto imports as part of a deal to avoid a trade dispute with the U.S.

President Trump has already caused consternation with his aggressive policy toward his free-trade partners Mexico and Canada. After threatening to raise tariffs to 25%, the increases were suspended for 30 days.

Trump has said he would impose tariffs on goods coming from the EU and described its trade policy as “an atrocity.” Trump also claimed the annual U.S. trade deficit with the EU was more than $300 billion.

Oxford Economics Group expects the U.S. to impose 25% tariffs on auto imports from the EU.

“This would raise the cost of European cars in the U.S. market, making them significantly less price competitive against American and non-EU alternatives. The result? A sharp contraction in EU automotive exports to the U.S.,” said in a statement last month.

“The U.S.-EU automotive trade is an important pillar of the European automotive industry’s success. In 2023 European car manufacturers exported €56 billion ($58 billion) worth of vehicles and components to the United States, accounting for 20% of the EU’s total automotive export value. the primary market for EU-made vehicles,” Oxford Economics said.

Trump hasn’t yet spelled out how he would approach the EU, but former U.S. ambassador to the European Union Gordon Sondland expects Trump to aggressively seek to put right what the U.S. considers long-term unfairness by the EU which extends past tariffs, to what the U.S. considers to be corrupt non-tariff barriers too.

“When EU citizens come to the U.S. on vacation or to live here temporarily, they don’t bring their own cars or their own food. They are prefectly safe eating our food and driving our cars and it’s high time the EU treated our products that way,” Sondland said in an interview last week with the BBC’s NewsNight program.

Sondland didn’t claim to speak for the Trump administration.

The Financial Times, in a report from Brussels, quoted Bernd Lange, head of the European parliament’s trade committee, saying the EU could lower its 10% import tax closer to the U.S.’s 2.5%.

“We can try to have a deal before escalating costs and tariffs,” the FT quoted Lange as saying. The EU would also offer to buy more natural gas and military equipment from the U.S., according to Lange.

BMW CEO Oliver Zipse has also called for lower tariffs on U.S. made autos.

Sondland said the EU imposes hidden barriers on American products. For cars, that can mean different safety standards. For food, there also are standards the EU doesn’t like. Hormone-fed beef is one area of contention.

“If we sell you a vegetable or a car or a product if it’s safe to use in the U.S. it should deemed to be safe to use in the EU,” Sondland said.

He was asked to sum up Trump’s tariff plan for Europe and the world.

The U.S. is tired of talking about impediments to its foreign trade and wants action now, he said.

“The message is very clear. We’ve had a list of demands and requests from all of these friends for years and sometimes decades and the results are similar every time. They take it under advisement. They’ll think about it then get back to us and Donald Trump has had enough of that.”

“This is a little bit of Michael Corleone (of Godfather movie fame) settling all of the family’s business at once. The tariffs are designed to get attention and if necessary they will remain in place until they get some economic bite. But this really gets people off their derrieres and gets them to the table to start to solve problems instead of talking and meeting endlessly.”

“When it comes to the EU that’s not going to be so easy to solve (compared with Mexico and Canada). The grievances between the U.S. and the EU, again the EU is our ally, it’s our friend, but the grievances have been on the table for ever. The non-tariff barriers, the protectionism, the trade deficit, the impregnability of the EU market compared to the U.S. market, the list goes on and on and on. And there’s going to have to be some tangible deliverables or these tariffs will definitely go into place.”

He was asked to define deliverables.

“In my view, they will have to let more American products into the EU market without either regulating or tariffying them to death.”

Won’t lowering food standards be a problem for the EU?

“If that’s a problem they’ll have to live with the tariffs,” Sondland said.

Sondland was ambassador to the EU during Trump’s first term.