Leading European car makers have warned that a trade war between the United States and the European Union would stifle economic growth and cost consumers money.
US president Donald Trump has threatened to impose tariffs of up to 20% on cars imported into the country, and the US Department of Commerce is conducting a review into whether such imports pose “a risk to national security”. EU officials say raising tariffs would leave them with “no choice” but to respond.
The US currently imposes a tariff of 2.5% on car imports, compared with the EU’s 10%. China recently dropped its import tariff from 25% to 15%. The Auto Alliance, a US industry body formed by the major car firms, says a 20% tariff on EU imports would add an average of $5800 (£5000) to the price of European cars in the country. The introduction of such tariffs could be hugely problematic for car firms that produce global models in single locations, such as Volvo. The Swedish marque recently unveiled the S60 saloon at its new factory in South Carolina.
The plant is described by Volvo R&D boss Henrik Green as “the example of free trade”.
The £770m, 2.3m-squarefoot facility is Volvo’s first in the US, and the sole production site for the S60 and, from 2021 onwards, the next XC90. Volvo plans for around half of the 150,000 models produced at the site annually to be exported, mostly to Europe and China. The facility also includes a processing centre to ready Volvo cars imported into the United States for sale.
Volvo boss Håkan Samuelsson warned that all tariffs would achieve would be to make cars more expensive. He added: “If we go from a system where we have large global trade back to the 19th century where everybody protects their own markets, it is not good news for the wealth of nations. That would be really bad, and not just for Volvo.