Europe’s carmakers already caught in crossfire of trade war

The European Union is open to a trade deal with the U.S., European Commission President Ursula von der Leyen said today.

But the giant economic bloc could also impose retaliatory tariffs of its own on U.S. goods. Some imports from across the pond are already caught in the crossfire.

Audi is holding recently arrived cars at U.S. ports, and Jaguar Land Rover plans to pause vehicle shipments from the U.K. for a month.

European car companies have a bit of time to plot their next move because they’ve got cars on dealer lots that entered the U.S. before the tariffs.

Sean Tucker at Kelley Blue Book said Audi could keep those cars sitting in port for a while “because at this point they have more than a three-month supply before their dealers reach a point where they’re having to pay the post-tariff cost.”

But pretty quickly, they’ll have to make a choice.

Selling internal combustion engine cars to the U.S. had been a steady source of revenue in a global market that’s leaning electric, said Karl Brauer at ISeeCars.com. But now?

“They can’t really sell even their internal combustion cars that still have plenty of profit built in to U.S. consumers because of the tariffs,” he said.

So what are their options, if the new tariffs stay in place? Brauer said they could shift more production to the U.S. to avoid import taxes. 

Or, said Mary Anne Madeira, an assistant professor of international relations at Lehigh University, “the best option for these firms is to divert trade away from the U.S. and towards consumer markets elsewhere in the world.”

European leaders, she said, have already been looking to open up trade to South America and other parts of the globe. But they’re also preparing to respond with retaliatory measures, if they don’t reach a deal with the U.S. 

The problem is, Madeira said, balancing all the competing interests and politics across 27 EU member countries would be really tricky.

One example: “The automobile industry, you know, is really located in Germany, but a lot of parts and suppliers are in Central and Eastern European countries like Czech Republic and Hungary,” she said.

So hurting the exports of one country in the name of standing up for the bloc could hurt relations among partners.