President Trump's trade deals with countries that export cars to the U.S. have two objectives: they're supposed to induce foreign automakers to increase U.S.-based production, even if they have been manufacturing here for decades; and they're meant to "open" foreign markets to vehicles made in the U.S. A wrinkle in these deals, as has been widely noted, is that a 15-percent tariff on cars imported from Japan actually makes those vehicles more competitive than U.S.-made vehicles facing a 25-percent tariff on imported parts and a 50-percent tariff on steel and aluminum.
Let's put aside those headaches for a moment and focus on what the White House is saying about these objectives. As the AP recently reported, Michigan Gov. Gretchen Whitmer has once again headed to Washington in an effort to talk some sense into Trump about how much agita these tariffs are going to cause for Detroit. In response, White House spokesperson Kush Desai said that Trump wants these deals to generate greater sales in Japan, South Korea, and Europe for U.S.-made vehicles.
Read more: These Are What You Wanted As First Cars (And What You Got Instead)
Does Trump Care Who Is Doing The Exporting?
In 2024, the U.S. exported less than 70,000 vehicles to Japan and South Korea; those countries sent nearly two million to the U.S. A lot of the cars that South Korea imported were probably made by German and Japanese companies in the U.S. – companies that obviously employ U.S. workers at their factories. Europe brought in significantly more, with Germany leading the charge at just over 166,000.
The issue, of course, is that if there is far higher demand for U.S-made vehicles in any of these countries, then local manufacturing rather than exports would be the way to go. As it stands, the numbers are so small that exporting production from the U.S. makes sense instead because it keeps the factories humming. But to use South Korea as an example, correcting a trade imbalance of 1.5-million vehicles (that's the 2024 number) would require that massive new demand for American cars emerge in the country. If that happened for, say, Ford, then the company would build a new factory there to avoid export costs.
For the record, the entire South Korean auto market amounts to just over 1.6 million vehicles annually, and the market constricted last year, according to local reporting. So it isn't going to double in response to Trump's tariff deal and erase the deficit, assuming that all those new imports were made in the U.S.
Focusing On Profits In The U.S.
Japan's market has topped out around 5 million in annual sales, with recent years falling below that mark. The EU is a 12-13 million annual market, with Ford being the only U.S. automaker with any meaningful market share, after GM sold its Opel/Vauxhall division in 2017. In the U.S., a good sales year adds up to 16-17 million new vehicles, and since the financial crisis, Detroit and the foreign companies that operate plants here have focused on extracting steady profits from those sales, mainly because the U.S. market isn't growing. That's why big pickups and SUVs are the order of the day – they bolster the bottom line.
In fact, the only market in the world that's seen robust growth is China, and the story there has been the success of domestic manufacturers, the rapid rise of EVs, and the struggles of foreign carmakers after years of profitable joint ventures.
The upshot is that the White House is confusing Americans by suggesting that Japan, South Korea, and Europe have erected onerous trade barriers to cars made in the U.S. when what we're really dealing with are growth barriers. There aren't enough new buyers of vehicles in these countries – which are facing aging and declining populations – to support a notable uptick in U.S. exports. The White House isn't going to abandon the message, but it's going to disappoint those citizens who buy into it when the exports don't happen.
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