^{Slovak Economy Minister Denisa Sakova. [EPA-EFE/MARTIN DIVISEK]}

Slovakia, the European nation producing the most cars per capita, is expected to suffer the most from U.S. President Donald Trump’s sweeping auto tariffs. While Germany’s auto giants face substantial losses in value, economists warn that Slovakia’s heavy reliance on car exports to the U.S. puts its economy at even greater risk.

Trump’s Tariff Strategy: A Major Shake-up in the Auto Industry

On Wednesday at 9 p.m. London time (4 p.m. ET), President Trump is set to unveil the details of his latest trade measures, which will impose a 25% tariff on all imported vehicles. These new levies, separate from existing tariffs on the global auto sector, are part of the administration’s broader effort to shift economic power back to the United States.

In addition to the vehicle tariffs, businesses importing auto parts into the U.S. will also face duties starting in May. The move has sparked concerns among investors and trade partners worldwide, with Germany strongly opposing the tariffs, calling them detrimental to the global economy.

Why Slovakia Stands to Lose the Most

Despite Germany’s major role in the auto industry, economists at Dutch bank ING suggest Slovakia will be the hardest hit in terms of total U.S. export volume. Slovakia, often referred to as the ‘Detroit of Europe,’ is home to several major car manufacturers, including Volkswagen, Stellantis, Kia, and Jaguar Land Rover. The automotive sector directly and indirectly employs more than 250,000 people in the nation of just 5.4 million, making up a significant portion of its economy.

According to ING, Slovakia exported nearly €4 billion ($4.3 billion) worth of passenger vehicles to the U.S. in 2023. Shockingly, over 73% of Slovakia’s total exports to the U.S. consist of cars and car parts, leaving the country alarmingly vulnerable to Trump’s new trade policies.

Production Shifts: Will Automakers Move to the U.S.?

With tariffs raising the cost of exporting to the U.S., auto manufacturers may be forced to rethink their production strategies. ING’s senior economist Rico Luman notes that many companies had increased shipments to the U.S. in anticipation of these tariffs, but that “this will unwind” once the measures take effect.

While some automakers may relocate production to the U.S. to bypass the tariffs, Slovakia still maintains a cost advantage. The country boasts significantly lower wages than Germany, which could incentivize companies like Volkswagen and Stellantis to keep production in Slovakia, at least for internal combustion engine (ICE) models. However, if tariffs persist, more manufacturers may shift production to the U.S., triggering job losses and economic downturns in Slovakia.

Slovakia’s Limited Options to Counter the Tariffs

Slovakian policymakers have voiced serious concerns over Trump’s aggressive trade policies, with Vladimir Vaňo, chief economist at the think tank Globsec, describing the situation as “worrisome” for the country. Unfortunately, given Slovakia’s small size and reliance on external markets, there appears to be “very little” the nation can do in the short term to counteract the economic damage.

The Slovakian government has yet to release an official response to the new tariffs, but industry leaders are already bracing for potential production slowdowns and economic strain.

The Bigger Picture: European Automakers and Global Trade Tensions

Beyond Slovakia, Trump’s tariffs are set to disrupt the broader European auto industry. Germany’s major car brands—including Volkswagen, BMW, Mercedes, and Porsche—are facing multi-billion-dollar losses as the U.S. market becomes increasingly costly to access.

Trade tensions between the U.S. and the EU have already escalated, with the European Commission threatening retaliatory measures if tariffs continue to rise. Meanwhile, global investors are closely watching how these trade policies will impact stock markets and business confidence across the automotive sector.

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With more than 250,000 jobs at stake and an economy deeply tied to car exports, Slovakia finds itself in a precarious position. As the U.S. implements its steep auto tariffs, the ‘Detroit of Europe’ could face factory slowdowns, job losses, and economic instability. While lower production costs may help Slovakia retain some manufacturing, long-term uncertainty looms large.

The global auto industry is at a crossroads, and Slovakia, despite its economic resilience, is now on the front lines of this high-stakes trade war.

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