At least for now, Europe has stayed out of Donald Trump’s threats of new tariffs. Who, not yet seated in the White House, has already made it clear that one of his first actions will concern the application of duties to China, Mexico and Canada.
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The risks for Europe
The decision to leave out the Old Container, however, has not reassured the international markets, who in any case expect a similar decision in the not so distant future. In practice, it’s just a matter of time. For this reason, yesterday the European stock markets closed in the red, and are still below parity in the first part of today’s session. In the last 24 hours, sales mainly concerned automotive and components.
“This is not surprising, given that the European Union is a major player in global trade, accounting for around 17% of global exports and 15% of imports. In 2023, the United States was the EU’s largest trading partner for exports (19.7% of the total) and second largest for imports (13.7%).” he explained in a note Gabriel Debach, market analyst at eToro, adding that Europe’s main exports to the US include machinery, vehicles, chemicals and food, while the bloc remains a net importer of energy and raw materials.
Between January 2022 and December 2023, EU exports to the US increased from €39.6 billion to €43.3 billion, while imports grew from €24.2 billion to €31.1 billion of euros. The trade balance, which went from +15.4 billion euros in January 2022 to +12.2 billion euros in December 2023, highlights the importance of this transatlantic relationship.
But is the situation really that critical? According to Debach, lhe concern about the impact of tariffs may be overblown. This is because, according to the expert, observing historical data – those between 2016 and 2023 – trade between the EU and the United States has shown an upward trend, despite the imposition of tariffs and trade tensions during the Trump administration (2017-2020).
“The tariffs have impacted some specific sectors, but overall trade has not been drastically affected as many feared. The question, therefore, is legitimate: do any new American tariffs pose such a significant threat? Certainly, the European economy appears more fragile today than in past years, with weak growth and a structural dependence on key sectors such as machinery, vehicles and chemicals. However, with a European Union that continues to be a key player in global trade and a transatlantic relationship central to both economies, the answer will depend not only on the concrete measures that are taken, but also on the ability of European companies to adapt to one increasingly competitive and uncertain international scenario”.
The risk for “the Detroit of Europe”
And if there is a country in Europe that could sink under the weight of US tariffs, it is above all Slovakia, known as the Detroit of Europe due to its robust automotive production. To quote the Assocamerestero numbers referring to 2023, the country, which has just 5.5 million inhabitants, is among the twenty largest car manufacturers in the world. The automotive industry represents 50% of the share of total Slovak industrial production, 13% of the country’s overall GDP and 42% of the country’s total exports.
Trump’s threats therefore represent “a big problem for Slovakia’Europe,” Vladimir Vaňo, chief economist at Globsec, a think tank based in the Slovak capital Bratislava, told CNBC.
“In 1990, after the fall of the Iron Curtain, Slovakia produced exactly zero cars. But it was very strong in what in our local language we call special production, which is just a nice way of saying production of weapons, armored vehicles, tanks and whatnot,” Vaňo said, explaining that Germany’s Volkswagen was the first car manufacturer to identify Slovakia’s potential in terms of engineering and manufacturing.
Today in the country, there are production plants of major manufacturers, including Stellantis, KIA, Jaguar and Land Rover, Volvo to name a few.
