You are here
Opinion: here's the real US-Europe car 'trade barrier'
TG's Paul Horrell on President Trump's latest remarks about US-Europe car trade
The President of the US has again ramped up his bellicose rhetoric on a trade sanctions war with Europe. As he’s threatened before, he has cars in his sights.
He tweeted last weekend: “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!”
But a trade war could be immensely damaging for a global business like the car industry. At the Geneva show, car bosses, asked about the President’s threat, tried hard to calm things down. So much so they don’t even want to talk about it for fear of fanning the flames. Bentley’s CEO Adrian Hallmark had just opened his mouth to answer my question when his PR man stepped in with a brisk, “well nothing’s actually happened yet.”
Fiat-Chrysler’s Sergio Marchionne reckoned that even talking about tariffs with Europe could damage delicate trade negotiations between the US, Canada and Mexico – the NAFTA area where new cars currently freely circulate. Mr Trump has also threatened tariffs there. BMW boss Harald Kruger said: “A trade war would damage us. Free trade is the lever for creating wealth.”
I’m not sure what barriers Donald Trump is referring to. Tariffs on US cars sold in Europe are only ten per cent, and no more than they are on cars from Japan or Korea.
That said, for other reasons most Japanese-badged and Korean-badged cars sold in Europe are made in Europe. It means they can be more responsive to local market needs, as well as cutting shipping costs and delays. Many US-badged cars are made in Europe too. You will have heard of Fords. Or the Jeep Renegade, which is made in Italy.
So let’s see what are the barriers to the sale of US-made cars in Europe. Is it tariffs? No. Is it some byzantine legislation around homologation? No.
It’s far simpler than that. It’s a self-imposed barrier by the Americans. They build cars suited to America, and don’t tailor them to Europe.
It’s been this way for years. I was once told by the boss of a US car company that European buyers would want to buy his newly introduced car, ‘because they rented one on holiday to Disneyland so they will have good memories’. Like, that was going to be enough?
Or the time I was told, straight-faced, by the then boss of Chevrolet Europe, that the Cruze, engineered in the US albeit built in Korea, was good enough to face the Focus. ‘What about the fact the Focus has downsized turbo engines and the Cruze doesn’t, or the fact the Focus has DCT transmission and the Cruze doesn’t, or ditto independent rear suspension or satnav?’ I asked (this was the last generation Cruze to be fair.)
‘Does the Focus have those things? I did not know that,’ said the boss of Chevrolet. ‘Yes, and so does the Golf and so does GM’s own Astra,’ I said. Soon after, Chevrolet withdrew in disgrace from Europe.
Believe me, Donald J Trump if you’re reading this, that withdrawal had nothing to do with trade barriers or tariffs. It was to do with an inept US car company just not bothering to do its research on the European market.
Here’s another one. At the launch in Britain of the Chrysler Sebring, I interviewed the sales chief. ‘What’s your car got that will make British buyers look at it?’ I asked. He told me it had cupholders that were heated and cooled. ‘Anything else?’ I asked. A long embarrassing pause followed. Then he brought the conversation around again to cupholders.
Meanwhile President Trump has complained of what he sees as a reluctance on the part of the European car makers to build cars on US soil. Has he never heard of the huge BMW, Mercedes and Volkswagen plants in the US, building cars that were specially tailored for US buyers and tastes?
And even the ones designed and built in Europe have been developed with more than a nod to American buyers. That’s why they “freely pour into the US”. And why the trade is largely one way.
But not entirely. The BMW X3, X4, X5 and X6 are built only in the US, and 70 per cent of those are exported. Apparently BMW finds no impossibility in selling them in Europe.