The United States has announced the further delayed implementation of lower tariffs on cars imported from the European Union (EU). This unexpected delay is occurring amid a backdrop of contentious trade negotiations between the two economic giants. The US and EU are still coming to terms with this brave new world of tricky, fast-moving trade rules. These reforms would result in increased costs for American businesses that import goods from Europe.
Germany tops the EU bloc in auto exports to the United States. Last year, it only shipped 431,000 vehicles. America’s delay in tariff reductions from the outset of negotiations is particularly surprising in light of Germany’s key position within the American automotive market. American car buyers have not experienced sharp price increases in 2023, despite the tariffs being fully implemented. The average car price has increased by under 2% since the tariffs went into effect last March.
The proposed reduced tariffs on US imports from the EU would not be implemented right away. The EU needs to first act independently and lower its own tariffs on US goods. This condition is indicative of the mutuality of the trade deal that both parties have described.
“These tariff reductions are expected to be effective from the first day of the same month in which the European Union’s legislative proposal is introduced.” – Latest specifics of the trade agreement released by both the EU and US
US automakers vehemently oppose reducing tariffs on nearly all foreign imports. They don’t want to see any progress on lowering harmful, discriminatory rates on American-made vehicles and auto parts entering Canada and Mexico. Mexico, South Korea, Japan, and Canada are the kings of the US auto market today. At the same time, Germany ranks fifth – after China, U.S., Japan and South Korea – among exporting countries.
For better or worse, earlier trade deals were instrumental in changing that industry, integrating the three countries into one market, North America. This amendment made it far easier for parts and vehicles to be transferred across international borders. For example, a vehicle built in Mexico or Canada might still have most of its parts manufactured in US factories. This points to just how closely connected the automotive supply chain is.
While we’re starting to see serious negotiations on trade agreements with other countries that export cars to the United States, there are still some glaring exceptions. The US still has no concluded agreements with Mexico and Canada, two of the US’ three largest trading partners—none, that is, if you don’t count the No.
