Trump’s tariffs could hamper Slovakia’s booming auto industry | Real Time Headlines

A small, landlocked country in the heart of Europe appears to be particularly vulnerable to President-elect Donald Trump’s influence.America First“The economic agenda.

Slovakia is nicknamed the “Detroit of Europe” for its booming automotive industry produce There are more cars per capita than any other country in the world.

Trump promises to implement blanket 10% or 20% Imposing tariffs on all goods entering the United States could damage the Central European country’s reputation as a global leader in auto production.

Incoming U.S. President on Monday swear Imposing new tariffs on China, Canada and Mexico was one of his first actions in office. These measures include a 10% tariff on all Chinese products entering the United States and a 25% tariff on all goods from Canada and Mexico.

The fact that Europe was not mentioned in Trump’s first tariff announcement will be seen as welcome news to EU policymakers, although the 27-nation bloc may worry that it is only a matter of time before Trump does. divert his attention to the region’s automotive industry.

This is a big problem for Slovakia. The country of just 5.5 million people relies heavily on U.S. trade, with cars accounting for a large portion of its U.S. exports and the industry indirectly employment More than 250,000 people.

“Slovakia has become the Detroit of Europe,” Vladimir Vaňo, chief economist at Globsec think tank in Bratislava, the capital of Slovakia, told CNBC by phone.

“In 1990, after the fall of the Iron Curtain, Slovakia had zero car production. But it was very strong in what we call in our local language special manufacturing, which was just weapons production, armored vehicles, tanks, whatever,” Vano said.

German Volkswagen Vaňo was the first car manufacturer to discover the engineering and manufacturing potential of Slovakia, starting with the assembly of gearboxes and quickly expanding to the manufacture of complete vehicles, Vaňo said.

Next to the Volkswagen factory in Bratislava, starOwn a Peugeot, modern carof Kia and TataJaguar Land Rover has since established a manufacturing center in the country.

Swedish Volvo In 2022, Volvo announced plans to become the fifth car company operating in the country, with plans to open a climate-neutral factory in eastern Slovakia in 2026. explain The 1.2 billion euro ($1.26 billion) factory will produce only electric vehicles.

Asked how concerned Slovakia should be about the prospect of Trump’s tariffs, Globsec’s Vano said: “It’s concerning. But it’s a wait-and-see, lame-duck approach.”

He added that while Slovakia appeared to be able to do “very little” in the short term, the country’s carmakers had proven relatively adept at coping with challenges in the past.

A Slovak government spokesman had no immediate comment when contacted by CNBC.

Alongside Slovakia is Germany Crisis lurks The auto industry is likely to be very vulnerable to Trump’s tariffs.

Europe’s largest economy is by far the region’s largest exporter of passenger cars to the United States, with exports worth 23 billion euros last year, according to data compiled by Eurostat and ING Research. This accounts for 15% of total German exports to the United States

Rico Luman, senior economist at ING Transport and Logistics, said the prospect of U.S. tariffs on European cars could make a bad situation in Germany worse.

“It’s the heart of manufacturing, right?” Luhmann told CNBC via video call. “So the automotive industry is ultimately linked to the steel industry and the chemical industry, so the entire supply chain is involved.”

At the same time, Slovakia is Europe’s third largest exporter of passenger cars, tied with Sweden, and exports to the United States will reach 4 billion euros in 2023.

It is worth noting, however, that Slovakia’s passenger vehicle exports account for nearly three-quarters (74%) of its total exports to the United States, putting the country seriously exposed to the looming threat of Trump’s tariffs.

Arushi Kotecha, automotive analyst at the Economist Intelligence Unit, told CNBC via video call: “Slovakia has obviously done a very good job so far in terms of car production, but now it faces some challenges.”

One of these problems stems from China.

The EIU’s Kotecha said European lawmakers were trying to stand firm and not allow Chinese carmakers, such as BYD Over-penetration of regional markets, whether in terms of sales or investments.

“At least for the Chinese, this is certain, because those tariff It has happened, it has happened in China Revenge … So the China part is done — but, of course, Trump’s election will bring some uncertainty,” Kotcha said.

“The problem with Trump is that he makes a lot of threats, but he doesn’t always follow through on them — or to varying degrees,” she added.

A spokesman for the European Commission, the EU’s executive arm, referred CNBC to a speech by European Commission President Ursula von der Leyen. statement Congratulations to Trump on his election when asked to comment on the prospect of U.S. tariffs.

“The EU and the United States are more than allies,” von der Leyen said in a statement on November 6.

“Let us work together to build a transatlantic partnership that continues to deliver benefits for our citizens. Millions of jobs and billions of dollars of trade and investment on both sides of the Atlantic depend on the vitality and stability of our economic relationship,” she said added.