A new wave of US protectionism could dramatically reshape the global automotive industry, as the United States looks to redress a persistent imbalance with the European Union in the trade of vehicles.
This topic is the focus of a new report from JATO Dynamics, ‘Understanding the automotive trade imbalance between the US and Europe’, which explores the root causes behind the disequilibrium in automotive trade flows between the two markets.
The report illustrates that this trade imbalance is the result of a combination of factors beyond tariffs. Until April, EU tariffs on imported vehicles from the US stood at 10%, while the reciprocal tariff on imports of American-made vehicles to Europe stood at just 2.5%.
“Recent analysis and commentary on this topic have focused on the disparity between the respective tariffs imposed by these two markets on the other. Yet this imbalance runs far deeper, resulting from decades of evolving structural, cultural and regulatory dynamics,” said Felipe Munoz, Global Analyst at JATO Dynamics.
As a percentage of the 16.09 million new light vehicles sold in the US in 2024, less than two-thirds (61%) were produced locally. The remaining 39% were imported, making its import share the highest among developed markets. By comparison, imports accounted for just 26% of new vehicle registrations in the EU, 20% in Korea, and only 7.8% in Japan.
In addition to the United States’ relative reliance on imports, its carmakers’ collective inability to offer products with genuine international appeal – with the exception of Tesla – is a significant contributing factor to its trade imbalance with Europe. In 2024, imports of EU-manufactured vehicles to the US totalled more than 821,000, while exports of American-made cars to the EU lagged at just 188,100 units*, a deficit of more than four to one.
“One of the main factors that sets the US apart from other markets is the preference among consumers for larger vehicles. American carmakers have increasingly adjusted their operations to cater for domestic demand, but this has come at the expense of success in international markets,” Munoz highlighted.
While SUVs enjoy similar levels of popularity in the EU and US, accounting for 52% and 57% of the new passenger vehicle market in 2024, the gap widens significantly for large SUVs more than five meters in length. These vehicles accounted for 21% of all SUVs in the US but represented only 2.4% of the segment in the EU. Comparably, 2.95 million pick-up trucks were sold in the US in 2024, versus just 156,300 in the EU.
“Pick-up trucks and large SUVs, in which American carmakers have largely specialised, have been a double-edged sword,” Munoz commented. “While they have been a major source of profitability for America’s two largest automakers – General Motors and Ford – demand for these vehicles in other markets does not exist on the same scale as in the US.” The lack of global appeal for these vehicles has prompted both automakers to scale back their overseas operations, reinforcing their dependence on the domestic market and contributing further to the trade imbalance. By contrast, European manufacturers have diversified their portfolios and tailored products to a broader range of international preferences, enabling them to penetrate the US and other markets more effectively.
“Without a concerted effort by US manufacturers to develop truly global products that align with regulatory requirements and market-specific preferences, this imbalance is likely to persist,” Munoz concluded.
*Excludes Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Luxembourg, Malta.
SOURCE: JATO
