American Cars, Trade and Tariff Misconceptions

Since President Trump's tariffs, as someone who spent 24 years in the auto retail industry, seeing reports or commentary on the auto industry lacking key contexts, is not new. The auto industry literally has thousands of internal moving parts which an overtightened tariff strategy alone can put out of tune.

Before the changes by Mr. Trump, tariff disparities between what the European Union were (10%) on American cars versus the 2.5% by the U.S on European cars. However that alone as many have suggested, does not explain the disparities of auto trade between the two markets. According to the European Automobile Association in 2024, the U.S imported 757,564 vehicles from the EU versus the 169.152 vehicles imported by the EU from the U.S. The U.S and European markets are very different in customer preferences, road sizes, fuel prices, local laws and taxes based on engine and vehicle size categories. US brands have or had their own European divisions which designed and produced vehicles specifically for and in the European markets based on those conditions rather than exported from the U.S because they were distinctly different from their American market vehicles. While many European Fords today share common platforms with American versions, they are still distinctive. Apart from North America and Europe, Ford currently has foreign divisions to produce market oriented vehicles in  Argentina, Thailand and China. 

General Motors main presence in Europe for decades wasn't by its American brands we are familiar with in the U.S. It was represented by British brand Vauxhall, German brand Opel and Swedish brand SAAB which it purchased a stake in 1989, acquired completely in 2000 and sold to Dutch Spyker in 2010, which has since ceased production. In 2017 to concentrate on the North American market, GM sold Opel and Vauxhall to PSA group ( owners of French brands Peugeot and Citroen), which subsequently merged with Fiat Chrysler Automobiles forming Stellantis, the present owners of the Jeep, Dodge and RAM brands. Ford has also reduced its global manufacturing footprint. Losing market share in Europe and ceasing decades of vehicle production in Brazil in 2021 and 2016 in Australia. The U.S has had a 25% import tariff on imported pick-up trucks dubbed the 'chicken tax' since the 60s as retaliation to European 25% tariff on American chicken. That is a reason why foreign auto companies have either assembled trucks for the U.S market in the U.S and Mexico or brought them in as passenger vehicles at a lower tariff and converted to trucks and vans here. 

Another reason for import/export discrepancies of autos is that many foreign vehicle makers already have a strong manufacturing presence in the U.S or North America for  this market. In 2023 foreign automakers produced more vehicles in the U.S than the traditional Big Three combined. 4.9 million versus 4.6 million. Major Korean, Japanese and European automakers have factories in the U.S producing vehicles often with a higher percentage of U.S made components than some American brands. There is a misconception that automakers should build all its vehicles for the U.S market here or that the percentage of vehicles sold in the U.S should be domestically produced reminiscent of the 1950s or 1960s. The 21st century reality is that today's automobiles have hundreds more parts than vehicles from that era depending on hundreds of global suppliers with comparative advantages some of which may not be in the U.S. These suppliers supply parts for both domestic and foreign automakers and only survive if they are guaranteed a certain volume of orders. The 2004 Asian Tsumani and Covid 19 pandemic were harsh reality checks on how vulnerable and interdependent global auto supply chains are. Everything from microchips, electronics and paint pigments were affected.

While much of the trade tension may involve China, some nostalgic American brands may only have survived because of the Chinese market demand which still sees prestige in them. Buick, which was saved from GM brands chopping blocks after the 2008 financial crisis, sold about 517,000 models in China during 2024 versus 167,000 in the U.S. In 2024 Lincoln sold 105,133 units in China versus 104,823 units in the U.S. Certain models of Buicks and Lincolns are produced in China for the U.S market for the same reason some European and Japanese models are exported to the U.S. Depending on their sales volume within a market, it may it not be economically feasible for a global automaker to source all components to build a vehicle within that market or to produce certain vehicles there and remain competitive.

Over the last few decades foreign competition has also forced American auto brands to be more competitive in price, quality and product availability. But in some ways American brands are still lagging and should not seek cover behind tariffs to lower this momentum. CAFE ( Corporate Average Fuel Economy Standards) forced many automakers to make more fuel efficient vehicles but sometimes at low profit margins so they could also sell more popular and profitable trucks and SUVs that are not as fuel efficient. To achieve this many foreign and domestic car makers produced many of these vehicles in Southern States, Mexico or imported them. American car companies have abandoned the small and mid-size sedan market. The least expensive cars on the U.S market today are foreign automakers who still produce them in the U.S and Mexico.

Another variable to America's global manufacturing competitiveness is the elephant in the room which no political party seems to want to challenge. The influence of overbearing labor union demands which have not only been a challenge to American auto competitiveness for decades, but also at our ports which handle exports and imports. No U.S ports rank in the world top 50 for efficiency as unions have resisted automation. Mr. Trump may want to reinvigorate American manufacturing with tariffs and fair trade, but for America to be more industrially competitive, it may be time to ask if labor unions are ready to make it happen.