'Europe's Detroit' built a thriving car industry. Trump tariffs now threaten to unravel its success

A tiny landlocked state successful the bosom of Europe appears to beryllium uniquely exposed to President-elect Donald Trump's "America First" economical agenda.

Nicknamed the "Detroit of Europe" owed to its thriving automotive industry, Slovakia produces much cars per capita than immoderate different state successful the world.

Trump's pledge to enforce a broad 10% oregon 20% tariff connected each goods coming into the U.S. threatens to tarnish the cardinal European country's estimation arsenic a planetary person successful car production.

The incoming U.S. president connected Monday vowed to enforce caller tariffs connected China, Canada and Mexico successful 1 of his archetypal acts successful office. The measures see an further 10% tariff connected each Chinese products coming into the U.S. and a 25% tariff connected each goods coming from Canada and Mexico.

The information that Europe was not mentioned successful Trump's archetypal tariff announcement volition beryllium regarded arsenic invited quality for European Union policymakers, though the 27-nation bloc is apt disquieted that it's conscionable a substance of clip earlier Trump turns his attention to the region's car sector.

That's a large occupation for Slovakia. The state of conscionable 5.5 cardinal radical relies heavy connected U.S. trade, with autos accounting for a sizable chunk of its U.S. exports and the assemblage indirectly employing implicit 250,000 people.

"Slovakia has turned into a Detroit of Europe," Vladimir Vaňo, main economist astatine Globsec, a deliberation vessel based successful Slovakia's superior of Bratislava, told CNBC via telephone.

"In 1990, aft the autumn of the Iron Curtain, Slovakia produced precisely zero cars. But it was precise beardown successful what we successful our section connection similar to telephone peculiar manufacturing, which is conscionable a bully mode to accidental arms production, armored vehicles, tanks and what person you," Vaňo said.

Germany's Volkswagen was the archetypal automaker to place Slovakia's imaginable for engineering and manufacturing, Vaňo said, starting with the assembly of gearing boxes earlier rapidly scaling up to the manufacture of afloat vehicles.

Alongside Volkswagen's works successful Bratislava, Stellantis-owned Peugeot, Hyundai Motor's Kia and Tata's Jaguar Land Rover person each since established manufacturing hubs successful the country.

Sweden's Volvo successful 2022 announced plans to go the 5th car institution to run successful the country, with a climate-neutral mill poised to unfastened successful eastbound Slovakia successful 2026. Volvo said the 1.2-billion-euro ($1.26 billion) works volition lone physique electrical cars.

Asked the grade to which Slovakia should beryllium acrophobic astir the imaginable of Trump tariffs, Globsec's Vaňo said: "It's worrisome. But it's a benignant of wait-and-see, lame-duck approach."

He added that portion determination appears to beryllium "very little" Slovakia tin bash successful the abbreviated term, the country's automakers person proven to beryllium comparatively bully astatine dealing with challenges successful the past.

A spokesperson for Slovakia's authorities was not instantly disposable to remark erstwhile contacted by CNBC.

Alongside Slovakia, Germany's crisis-stricken car manufacture is apt to beryllium highly susceptible to Trump tariffs.

Europe's biggest system is by acold the region's largest exporter of rider cars to the U.S., accounting for 23 cardinal euros worthy of exports past year, according to information compiled by statistic bureau Eurostat and ING Research. That represents 15% of Germany's full exports to the U.S.

Rico Luman, elder assemblage economist for transport and logistics astatine Dutch slope ING, said the imaginable of U.S. tariffs connected European autos is apt to marque a atrocious concern successful Germany adjacent worse.

"It is the bosom of the manufacturing industry, right?" Luman told CNBC via video call. "So, the automotive manufacture is linked yet to the alloy manufacture and the chemic industry, truthful it is the afloat proviso concatenation that's progressive here."

Slovakia, meanwhile, is Europe's joint-third-largest exporter of rider cars to the U.S., alongside Sweden, with 4 cardinal euros worthy of exports to the U.S. successful 2023.

Notably, however, Slovakia's rider car exports relationship for astir three-quarters (74%) of its wide export bundle to the U.S., leaving the state acutely exposed to the looming menace of Trump tariffs.

"Slovakia has evidently done precise good with car accumulation truthful acold but present it is facing immoderate challenges," Arushi Kotecha, automotive expert astatine the Economist Intelligence Unit, told CNBC via video call.

One of those issues stems from China.

The EIU's Kotecha said European lawmakers were trying to clasp their crushed by not allowing Chinese automakers specified arsenic BYD to penetrate the determination marketplace excessively much, some successful presumption of income and investment.

"At slightest with the Chinese, determination is certainty due to the fact that those tariffs person happened, China has retaliated … truthful the China portion of it is done — but, of course, determination is immoderate uncertainty that comes successful with the Trump election," Kotecha said.

"The occupation with Trump is that helium makes a batch of threats, but helium doesn't ever travel done — oregon the grade to which helium does travel done varies," she added.

A spokesperson for the European Commission, the EU's enforcement arm, referred CNBC to European Commission President Ursula von der Leyen's statement congratulating Trump connected his predetermination triumph erstwhile asked to remark astir the imaginable of U.S. tariffs.

"The European Union and the United States are much than conscionable allies," von der Leyen said successful a Nov. 6 statement.

"Let america enactment unneurotic connected a transatlantic concern that continues to present for our citizens. Millions of jobs and billions successful commercialized and concern connected each broadside of the Atlantic beryllium connected the dynamism and stableness of our economical relationship," she added.