In the 1980s, Japanese carmakers were accused of gutting the US car industry. In response, the Reagan administration negotiated voluntary export restraints — politely worded, but unmistakably coercive, pressuring them to make more cars in the US to maintain market access. As the Trump administration imposes a new round of tariffs on foreign-made cars and components, it is tempting to draw parallels to the past.
Once again, Asian carmakers, now including South Korean groups Hyundai and Kia, find themselves at the centre of US trade policy. But this time, the consequences run deeper and are more destabilising — not because protectionism is new, but because the auto industry has fundamentally changed.
Back then, a car was mostly steel, rubber and mechanical simplicity. Today, the average vehicle contains more than 30,000 parts. In the early 1990s, electronics made up just a tenth of a car’s total cost. Today, it is up to about 50 per cent, driven by the growing use of sensors, electronics and chips in modern cars, as well as the higher number of components overall. That complexity has resulted in sprawling, globally integrated supply chains, finely tuned over decades for just-in-time delivery and multi-region sourcing. Today’s cars are no longer single origin products, but the sum of countless cross-border transactions. Yet that interdependence becomes a liability when trade actions shift focus from finished cars to the components that make them possible.