Why Trump's return threatens the European car industry

The future US president has already pointed the finger at imports from Europe

Photo by: Flickr

By: Riccardo Ciriaco

Nov 7, 2024 at 4:30am ET

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The only certainty of the Trump era is that there are no certainties. This applies to everything, but especially to the automotive industry, a sector that has been mentioned more than once in the remarks of the future 47th President of the United States.

The weight of this sector inevitably increases with the presence in Washington of Elon Musk, the CEO of Tesla, who has openly backed the tycoon behind his promise to become head of a new commission on government efficiency that will recommend cuts and reforms to federal laws.

"He's a character, a special guy and a supergenius," Trump cheered in his victory speech. "We have to protect our geniuses, because we don't have that many."

But this is where doubts arise about the White House's next steps. How will the US president behave with the boss of the world's largest electric car manufacturer at his side at a difficult historical moment for the industry? The issue is complicated and is also linked to relations with Europe.

Electric car: yes or no?

Let's start with the sentences that have been uttered in the last few hours: Elon Musk must be protected. If you read it like that, you might think that Tesla and the electric car should also be protected. However, the statements on the campaign trail are ambiguous and could both confirm and deny this interpretation.

On the one hand, Trump has softened his previous positions on electric cars and climate change, stating that he is "pro electric car" as "Elon has been very supportive of (it)". On the other hand, he added that battery-powered vehicles are "only a small part of the market" and "people want petrol and hybrid cars".

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So what can we expect? Assuming that the tycoon keeps his promises, it is possible that the situation will remain as it is, without a new push for the transition and at the same time without undoing the work of his predecessor Biden, who was not only the father of the Inflation Reduction Act (IRA) and the $7,500 incentives for buying electric cars, but also of the (non-binding) goal of bringing 50 per cent of sales to all-electric and plug-in hybrid cars in 2030. Or that the changes will not be radical.

Alarm in Brussels

What could change (for the worse) are relations with the European Union. Famous for his zeal for US-made products, Trump recently threatened to crack down on imports of all vehicles from the Old Continent, which he believes are guilty of preventing Americans from buying American cars. "This is tearing us apart" and "I will put a stop to it", he warned Brussels.

The interior of a BMW

Photos from: BMW

In the past, the German premium brands (Audi, BMW and Mercedes) had already come into the president's crosshairs because they were accused of taking market share from US companies. In 2018, during the first term, a 25% tariff on European imports was feared as a result, ten times the current 2.5% tax. Nothing was done at the time, but now the threat is becoming more concrete as Europe counters the potential Chinese invasion by imposing additional tariffs in defence of domestic production and sales.

A move that would also play into the hands of Elon Musk, who already has an overseas presence with his Gigafactory in Berlin and is therefore - precisely - protected from a potential trade war. Conversely, BMW, Mercedes, VW and Volvo also have their own factories in the USA. It remains to be seen what threatens the Mexican BMW plant.

It remains a mystery what the new presidency will do with the 100% tariffs on imports from China recently envisaged by the Biden administration. What interests will Trump sacrifice in view of the Tesla CEO's close ties to China and the US brands that need to be defended? Another doubt that can only be dispelled in the coming weeks.