Rough road for Europe’s ties with Washington

Europe

Most car owners know that unless you really understand what you’re doing it’s a bad idea to start tinkering around under the hood. Especially with the modern, complex automotive marvels of today.

So it is with the auto industry as well – so complex and powerful it can change the course of the global economy. Like cars themselves, it’s not a good idea to start tinkering around with the industry, especially if your goal is just to get a louder sound rather than arrive at a better destination.

But US President Donald Trump never learned that lesson. Hard to imagine that the son of a wealthy real estate developer from New York City was ever keen to get his own hands dirty attempting to repair the family car, even when young. As an adult, it seems he was more interested in how tabloid newspapers function than the triumph of engineering in cars.

The same is with the entire auto industry and nuances of international trade. Details and complexity are tiresome to Trump.

In his mind, the fact that Europe exports more cars to the US than vice-versa means the US is getting cheated. With characteristic bad grammar and disdain for facts he tweeted “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

Now Trump is preparing to weaponise a WTO ruling over European airplane consortium Airbus. The US could impose an additional 25 per cent tariff on imported European cars around mid-November.

The reality is that the car industry is so international that it is wired together across oceans. It is particularly true of trans-Atlantic trade and manufacturing of autos. European carmakers have massive factories in the heartland of America that produce one in six of the cars made in the US. Nearly a half-million American workers have high-paying jobs at plants in South Carolina, Indiana, Tennessee and Alabama producing cars with the Mercedes, BMW and Volkswagen badges, in states that voted for Trump in the 2016 presidential election.

German car plants in the US rely on a downstream network of American and European suppliers as well as retailers. The global value chain connects European-owned US producers to supply chains in Europe, Asia and the rest of the world.

It is true that US automakers have a dwindling presence in Europe. Ford continues to manufacture at plants in France, Germany and the UK, and Fiat-Chrysler is a true transatlantic partnership, but most US carmakers have decided that Europe is simply not worth it due to high emission standards and an already oversaturated market.

But that is their own business decision, not the result of “cheating” by the European Union itself. The automobile is no simple commodity like iron ore or soybeans. For better or worse, it has transformed our world, enabling the flight to the suburbs from city centres and empowered hundreds of millions across the planet to travel, explore and enjoy a sense of freedom.

In Germany, which produces 55 per cent of EU auto exports, the sector generates 5 per cent of the country’s GDP. And Germany is the biggest engine driving the EU economy.

If they weren’t before, Europeans are increasingly aware that they are dealing with a perplexing and unstable figure in Trump. As tariffs loom, Italy’s respected President Sergio Mattarella made a visit to the White House. After fumbling the name of the elder statesman – some said it sounded like he called him “President Mozzarella” – Trump went on to laud the long history of Italian-American friendship, so long, in fact, it is a “shared cultural and political heritage dating back thousands of years to Ancient Rome”, he said.

At best a hobbyist at playing president, economist or historian, Trump has proven yet again he is unqualified to tinker with the auto trade or anything else important. Likely, the only thing that could have really engaged him to try to understand the sector is if he had attempted to make Trump-branded cars, but like the airline, university, liquor and casinos that once carried his name, it is unlikely they would have really gained the traction needed to thrive.

Endurance is one of the desired traits of any motor vehicle, a characteristic we all now need.

It is just 383 days until the 2020 election to select the next US leader. Let’s hope we all have enough fuel in the tank to make it.

Jon Van Housen and Mariella Radaelli are editors at www.luminosityitalia.com

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