The automotive sector, particularly in the United States, faces significant changes under the new administration. President Trump has emphasized a return to traditional manufacturing, focusing on internal combustion engines and imposing tariffs on imports. This shift could have profound implications for global carmakers, especially those reliant on exports to the US market. The potential impact on electric vehicle (EV) development and international trade dynamics is also noteworthy.

Impact on European Automakers and Trade Relations

European car manufacturers are bracing for the effects of potential tariffs imposed by the US. Companies like Volkswagen, Volvo, and Stellantis face challenges due to their reliance on exporting vehicles to the American market. Analysts predict that these tariffs could disrupt existing supply chains and affect sales. The uncertainty surrounding trade policies has created concerns among industry leaders about the future of transatlantic business relations.

European automakers heavily depend on importing cars into the US market, with approximately half of their US sales being imports. Moody’s analysts highlight that Volkswagen, Volvo, and Stellantis are particularly vulnerable due to their significant import volumes. Tariffs would not only increase costs but also potentially reduce consumer demand. For instance, Volkswagen has already expressed concerns about the economic impact of such measures. Additionally, the UK's automotive sector, which exports around 10% of its cars to the US, may experience mixed outcomes. Luxury brands like Jaguar, Land Rover, and Bentley might absorb tariff costs more easily, but overall trade relations remain uncertain, especially post-Brexit. The UK hopes to benefit from differentiated treatment outside the EU, though this remains speculative.

Shifting Dynamics in the US Automotive Market

President Trump's policies aim to revitalize traditional manufacturing by supporting gas-powered vehicles over electric ones. This approach seeks to preserve jobs in regions where auto factories are concentrated, particularly in Detroit. However, the long-term consequences for the US automotive industry are complex. While domestic manufacturers like General Motors and Ford may initially benefit from relaxed regulations, the removal of EV subsidies could hinder their transition to cleaner technologies.

Trump's focus on preserving gasoline-powered vehicle production aligns with his goal of maintaining high-employment factory operations. The "big three" US automakers—General Motors, Ford, and Stellantis—are likely to gain from fewer restrictions on highly profitable SUVs and pickup trucks. Yet, this could slow down the adoption of electric vehicles, affecting consumer enthusiasm and sales growth. Analysts note that buyers still find EVs less attractive due to higher upfront costs compared to traditional cars. Moreover, subsidy cuts could impede American automakers' efforts to transition to electric technology, as seen in the postponement of scaling programs. In contrast, Tesla, with its all-electric lineup and strategic global factory placements, stands to gain from reduced competition and favorable autonomous vehicle regulations. The company's position in the US market appears increasingly advantageous as competitors delay their shift to electric vehicles.