In an open letter to European Union leaders, the European Automobile Manufacturers’ Association (ACEA) has called for a “grand bargain” between the EU and the incoming US administration under President-elect Donald Trump. The letter stresses the importance of maintaining strong trade relations with both the US and China, which are crucial to the success of the European car industry.

The request comes amid escalating tensions between the EU and the US, with concerns rising that Trump’s planned tariffs on Chinese imports could lead to retaliation against countries maintaining strong ties with China. The ACEA, which represents major European car manufacturers such as Mercedes-Benz, BMW, Ford Europe, Jaguar Land Rover, Renault, Opel, and Volkswagen, emphasized the need for the EU to avoid a trade war while ensuring open markets for the automotive sector.

ACEA’s president, Ola Källenius, noted in the letter that both China and the US are vital markets for the European car industry. The ACEA expressed concerns that protectionist measures, such as tariffs and trade barriers, could harm the sector’s long-established and functioning supply chains. Källenius called for cooperation between the EU and China to resolve trade disputes, particularly in the case of the EU’s anti-subsidy investigation into Chinese electric vehicle (EV) imports.

Struggles of European Car Industry Amidst Growing Competition

The European car industry continues to face challenges, including heightened competition from Chinese car manufacturers. Chinese cars are often cheaper, come with more features, and benefit from subsidies that European manufacturers do not receive. In response, the EU has imposed higher tariffs on Chinese EV makers to protect its domestic industry.

However, the German car industry has expressed concern over these tariffs, fearing that they could provoke retaliatory measures from China, where many European car companies have significant operations. Major German brands such as BMW, Volkswagen, Audi, and Mercedes-Benz rely on Chinese operations and have enjoyed benefits like tax incentives and cheaper land. With China being a key market, any punitive tariffs could have serious repercussions for European manufacturers.

As global trade tensions continue to rise, the European car industry’s ability to navigate the complex trade relationships between the US and China remains critical for its survival.