The automotive landscape between Europe and the United States is heating up, with significant implications for global financial markets. This week, Volvo Cars’ CEO, Hakan Samuelsson, made headlines by calling on the European Union to eliminate its 10% tariff on American-made cars. Samuelsson argues that European automakers no longer need such protective measures and suggests that the EU should take the initiative in promoting free trade.
Volvo’s call comes at a time when tensions are rising due to U.S. President Donald Trump’s threat to increase tariffs on European Union auto imports from the current rate to 30% starting August 1. This escalation is part of a broader trend of tit-for-tat tariffs that have threatened the profitability and strategy of automakers on both sides of the Atlantic.
EU Tariffs Under the Spotlight
Historically, the tariff imbalance has been significant. Before the Trump administration, the U.S. imposed only a 2.5% tariff on European-made vehicles, while the EU maintained a 10% duty on cars imported from the United States. In recent years, Washington increased its tariff on European cars to a steep 27.5%. Despite ongoing negotiations, a trade truce remains out of reach.
Samuelsson’s remarks follow Volvo’s second-quarter earnings announcement, signaling a proactive, rather than reactive, approach to the increasingly complex global auto market. “If Europe is for free trade, we should be the ones showing the way and going down to very low tariffs first,” Samuelsson told Reuters.
Rethinking Protectionism
Samuelsson made it clear that established European brands like Volvo, BMW, and Mercedes-Benz do not require tariffs to compete. “The European car industry definitely does not need to have any protection from American auto builders,” he said, challenging conventional wisdom in Brussels.
Volvo’s position is especially noteworthy given its unique vulnerability to U.S. tariffs. The company, now majority-owned by China’s Geely Holding, imports most of its vehicles sold in the U.S. from European plants. Recent American tariffs have placed immense pressure on Volvo’s profit margins and strategic flexibility.
Strategic Shifts: Production and Product Offering
To insulate itself from escalated tariffs, Volvo announced plans to begin U.S. production of its top-selling hybrid XC60 SUV in late 2026. Currently, Volvo’s South Carolina plant manufactures only the Polestar 3 and the electric EX90 model, both of which have struggled to meet sales expectations in the American market. The move to localize XC60 production is both a hedge against further tariffs and a signal that Volvo is investing in its U.S. footprint amid uncertain trade winds.
Reuters also reported that Volvo has begun slimming down its U.S. product lineup, focusing its resources on core models with the highest market demand and best margins. “These are the measures we have control over, rather than when it comes to tariffs we can only have an opinion like everybody else,” Samuelsson commented, demonstrating a pragmatic approach to shifting global policies.
iXDeep: Market Impact Analysis
The ongoing transatlantic tariff drama extends far beyond the auto industry, creating ripples in global financial markets, especially in forex and crypto sectors.
Forex Markets:
The uncertainty generated by escalating trade threats historically contributes to elevated volatility in relevant currency pairs, notably EUR/USD and USD/SEK. The prospect of new tariffs often leads investors to adjust portfolios defensively, favoring safe-haven currencies and reducing exposure to growth-linked currencies. Should the EU heed Volvo’s advice and move toward lower tariffs, the euro might experience a bullish response, as free trade is typically seen as a positive macroeconomic force.
Equities and Sectors:
For automakers with global operations, like Volvo, BMW, and Volkswagen, trade tensions translate into short-term market jitters and can impact share prices. A conciliatory shift in EU tariff policy could trigger a sector-wide rally, as lower tariffs would further support export-driven growth.
Crypto Markets:
Indirectly, trade hostilities and the threat of new tariffs can boost the narrative for borderless assets, including cryptocurrencies. Escalating geopolitical uncertainties often encourage speculative flows into digital assets such as Bitcoin and Ethereum, both as hedges and as alternatives to traditional asset classes facing policy shocks.
In short, Volvo’s bold proposal may provide both traditional and digital market participants with new strategies, as policymakers weigh free trade against political risk
