US-Europe automotive trade imbalance driven by competitiveness, not just tariffs

A new report from JATO Dynamics, “Understanding the automotive trade imbalance between the US and Europe,” indicates that the disparity in vehicle trade between the two regions is primarily a matter of competitiveness and not solely due to tariffs.

Key findings from the report:

• In 2024, only 61% of vehicles sold in the US were produced locally, making its import share the highest among developed markets. This compares to 26% in the EU, 20% in Korea, and 7.8% in Japan.
• The US imported over 821,000 EU-manufactured vehicles in 2024, while exporting only 188,100 American-made units to the EU, representing a deficit of more than four to one.
• The lack of global appeal for vehicles produced by US automakers, with the exception of Tesla, is a significant factor in this trade imbalance.

Felipe Munoz, Global Analyst at JATO Dynamics, stated that while recent discussions have focused on tariff disparities (EU tariffs on US imports at 10% vs. US tariffs on EU imports at 2.5% until April), the imbalance stems from “decades of evolving structural, cultural and regulatory dynamics”.

Munoz highlighted that a main factor contributing to this imbalance is the strong consumer preference in the US for larger vehicles. American carmakers have increasingly focused on catering to this domestic demand, which has limited their success in international markets. For instance, while SUVs are popular in both the EU (52% of new passenger vehicle market in 2024) and the US (57%), large SUVs (over five meters in length) accounted for 21% of all SUVs in the US but only 2.4% in the EU. Similarly, 2.95 million pick-up trucks were sold in the US in 2024, compared to just 156,300 in the EU.

Munoz commented that the specialisation in pick-up trucks and large SUVs, while highly profitable for General Motors and Ford, has been a “double-edged sword” due to the limited demand for these vehicle types in other markets. This has led US automakers to reduce overseas operations, increasing their dependence on the domestic market and exacerbating the trade imbalance. In contrast, European manufacturers have diversified their product portfolios to align with a wider range of international preferences, enabling more effective penetration into the US and other markets.

Munoz concluded that “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”