Donald Trump is threatening to impose hefty tariffs on European car imports, frustrated that American vehicles—except for Tesla—aren’t more popular in Europe. But why don’t Europeans buy more US-made cars?
One key reason lies in the narrow, cobbled streets of many ancient European cities, particularly in Italy, which are not well-suited for large American vehicles. As automotive analyst Hampus Engellau puts it, navigating a big SUV through Italy can be extremely challenging.
Cost is another major factor. Mike Hawes, CEO of the UK-based Society of Motor Manufacturers & Traders, notes that Europe’s higher fuel prices make smaller, fuel-efficient cars more attractive, whereas American people typically prefer larger vehicles. Engellau also highlights the stark difference in fuel costs—Americans pay per gallon what Europeans pay per liter, making fuel-guzzling vehicles less viable in Europe.
Despite these challenges, European carmakers have successfully expanded into the US market. Trump himself has acknowledged that “millions of cars” from brands like BMW, Mercedes, and Volkswagen are shipped to the US annually. In 2022, the EU exported nearly 700,000 cars to the US, valued at €36 billion, while the US sent just 116,207 vehicles to Europe, worth €5.2 billion.
Trump argues that this imbalance results from unfair trade policies, particularly the EU’s 10% tariff on US car imports, which is significantly higher than the 2.5% tariff the US imposes on European cars. To address this, he has proposed increasing tariffs on European car imports, following his previous decision to impose 25% tariffs on steel and aluminum—two critical materials for car manufacturing.
In response, EU officials are considering lowering their own tariffs to avoid a potential trade conflict. However, not everyone in the US auto industry supports Trump’s approach. Ford CEO Jim Farley has criticized the move, arguing that it has led to rising costs and uncertainty.
Some industry experts believe the focus on trade is misplaced. Automotive consultant Andy Palmer, formerly of Nissan and Aston Martin, argues that shipping cars globally is inefficient due to high transportation costs. Instead, most carmakers prefer to manufacture vehicles close to their target markets. As a result, many European brands—including BMW, Mercedes, and Audi—already produce some of their larger models in North America, while some of these vehicles are later exported back to Europe.
Historically, US automakers have pursued a similar strategy in Europe. General Motors previously owned Opel/Vauxhall and Saab but sold them off, while Ford divested brands like Aston Martin, Jaguar, Land Rover, and Volvo. More recently, Ford has been shifting its European focus toward electric and commercial vehicles, moving away from smaller, budget-friendly models. The company plans to cut thousands of jobs in the UK and Germany by 2027 as part of this transition.
Tesla has managed to carve out a presence in the European market with a factory in Germany producing Model Y cars. However, the company faces increasing competition from low-cost Chinese electric vehicles, which are gaining traction in Europe.
According to Jose Asumendi, head of European automotive research at JP Morgan, Europe is a highly competitive market. Local brands dominate in their home countries—Germans favor BMW, Mercedes, and Volkswagen; the French prefer Peugeot, Citroën, and Renault; and Italians lean towards Fiat and Alfa Romeo. While some European nations are more open to foreign brands, the market is already saturated with Japanese, South Korean, and Chinese automakers. Additional hurdles for US manufacturers include varying tax regulations and the need for multilingual marketing.
Despite Trump’s claims, industry experts like Palmer and Asumendi don’t believe Europeans have a particular aversion to American cars. Instead, competition is simply intense, and European consumers have a wide range of options.
Trump’s goal is to strengthen the US car industry by encouraging domestic production and innovation. However, Palmer warns that trade wars rarely achieve this, arguing that tariffs can shield companies from competition, leading to stagnation rather than innovation. Instead of focusing on trade restrictions, Palmer believes the key to success lies in investment and collaboration.
