The trade war that US President Donald Trump has launched between the United States, the European Union, and China is starting to encompass other nations within the global industrial supply chain.
Called “globally integrated countries” by the World Bank, these emerging economies have attracted investment in modern industries like automotive manufacturing, renewable energy, telecommunications, and consumer goods by offering low labour costs, lighter regulations, and strategic geographical locations.
Among the countries impacted is Morocco, the biggest exporter of vehicles and auto parts to the EU. The Kingdom currently manufactures models from Dacia, Renault, Peugeot, Fiat, Opel, and Citroën, in addition to producing spare parts for American, Japanese, British, German, and other brands.
Last month, the European Commission imposed countervailing tariffs on imports of aluminium wheels manufactured in Morocco. The commission cited “unfair practices” and “foreign subsidies” that it said threatened the car industry in Europe.
Brussels considers Moroccan subsidies for the automotive sector incompatible with World Trade Organisation (WTO) rules, citing grants, loans, and tax exemptions provided by the Moroccan government, as well as external support for Chinese companies operating in Morocco under the Belt and Road Initiative (BRI). A commission statement said these products were “sold below their fair market value in the European market, distorting fair competition,” so it introduced countervailing tariffs of between 5.6% and 31.4%.
New protectionism
European auto production and sales have dropped, in part due to competition from Asia, especially Chinese electric vehicles (EVs). According to the European Automobile Manufacturers Association (ACEA), EU new car production fell by 6% in 2024 to 11.4 million vehicles, following a drop in output in Italy and Belgium and the closure of plants in France, Romania, and Germany.
German production fell to four million vehicles (equal to South Korea’s sales), while Spain and the Czech Republic produced 1.44 million cars. In contrast, Morocco produced 700,000 vehicles in 2024, most of which were sold in 71 countries, out of the 75.5 million new cars sold globally last year.
The European Commission said its customs measures against Morocco were to “protect European manufacturers from a flood of wheels manufactured in Morocco, which now threaten 16,600 jobs within the Union”. The EU had already imposed tariffs of up to 17.5% in 2023 on the same products to counter what it called “dumping,” raising overall costs for Moroccan exporters to the European market and pushing up local manufacturing expenses.
Factories in Kenitra (north of Rabat) and Casablanca produce around nine million aluminium wheels annually for various vehicle types, including for Chinese cars, and Analysts think the wheel dispute may be a precursor to a broader EU-China trade conflict, particularly in the automotive and electric battery sectors.
The Moroccan government has said it is considering how to respond to the Commission’s decision, describing the levies as “unjustified”. Among its options is to introduce reciprocal tariffs on European goods. Spokesman Mustapha Baitas said the Moroccan government was “studying all appropriate measures” before describing the country as subject to “selective logic”.
Joined at the hip
According to shipping company Maersk, trade between Morocco and the EU reached $110bn in 2023, including $68.7bn in imports to Morocco and $41.7bn in Moroccan exports (goods and services) to Europe, giving a $27bn trade surplus in favour of the EU. Almost two-thirds of Morocco’s total foreign trade is with the EU.
Since 2008, Morocco has enjoyed ‘privileged partner’ status within the EU, and Brussels considers Rabat its oldest partner in the Arab region, dating back to 1969. Morocco even applied to join the European Common Market in 1985, but this was rejected on geographical (and cultural) grounds.
An economic partnership agreement was signed in 1996 and came into force in 2000. In 2012, a free trade area was launched, allowing for the free exchange of industrial products without tariffs, with agreed quotas in agriculture and fisheries. Some trade disputes have reached the courts; however, more recent trade friction has pushed Brussels towards protectionism under pressure from its farmers’ unions, manufacturers’ associations, and far-right political populists.
Despite the tariffs, Chinese EVs are still competitive in European markets, with BYD having now overtaken its American rival, Tesla. Yet cars are becoming increasingly politicised in Europe, with factories shutting down as Asian models eat up sales. This is hitting jobs in a sector that employs around 14 million Europeans.
‘Backdoor’ entry
Some are moving with the times. China’s Gotion High Tech Co. is building a huge $13bn EV battery factory in Kenitra that will be the largest of its kind in Africa, while BTR and Shenzhou International are investing $990mn to build battery components in partnership with Morocco’s Al Mada. These facilities will rely on local raw materials such as lithium, cobalt, and phosphate.
