Anna Milano graduated from the University of Bologna with a degree in International Cooperation and Development. Currently, she is pursuing a master’s degree in Public Policy and Social Change at the University of Tübingen. With an interest in MENA affairs, she is dedicated to understanding the complexities of the region and promoting sustainable development. They aim to combine their knowledge of economic development and sustainability with effective policy-making to address pressing challenges.
Morocco has become a strategic destination for foreign investments, particularly in the automotive and battery sectors. The sophisticated transportation system, and the large reserves of phosphates – essential for car batteries – have leveraged its position in the international competition. Due to a six-year drought that pushed farmers out of agriculture, the country offers a growing, affordable labour force, but despite the growth potential, a new wave of protectionist measures threatens the free access to the European market. The increasing Chinese investments in the country play a role in it.
PSA Headquarters in Paris, France. PSA is also a leading investor in Morrocco’s automotive industry. Source: TTTAAA (Licensed under the Creative Commons Attribution-Share Alike 4.0 International license. No modifications to the original image were made).
Domestic economic transformation
Morocco’s real GDP growth has remained steady since 2023, growing at a 3% rate. What changed is the composition of the economic drivers. Indeed, while the prolonged drought severely affected the agriculture sector, accelerating its transformation, the secondary sector accelerated the growth.
Morocco has become a rising player in global manufacturing, thanks to its booming automotive sector and strategic foreign investment. The car industry registered an increase of 6.3% in 2024, followed by aeronautics, and phosphate and derivatives. Over 260 auto factories are in the country, which created more than 170,000 direct jobs by 2023. Yet, this growth was mainly driven by multinational companies. Foreign investors dominate high-value segments like engine assembly and electronic systems. Moroccan firms mostly handle lower-value tasks such as wiring and seating, which proves the limited engagement of domestic suppliers.
Low-cost labour and natural resources attract foreign direct investments, but enhance the risks of falling into the middle-income trap. It calls for national programs to improve education and training, to support the shift into higher-value local production. Close to these internal challenges, Morocco must navigate through the changing international equilibrium.
Bilateral Ties and International Pressures
Morocco-United States
Since 2006, Morocco has been the only African country with a Free Trade Agreement with the United States. The two countries also operate in the field of regional security, counterterrorism, and military coordination – e.g., “African Lion”, a co-joint series of military exercises since 2007.
On March 25th, the U.S. House of Representatives praised the “longstanding friendship” with Morocco, ahead of the 250th anniversary of diplomatic ties in 2027. Resolution 251 celebrates the importance of the relationship in promoting “mutual economic and security interests”. Still, Morocco was not exempted from Trump-era tariffs to reduce the US’ trade deficit. Thanks to the goods trade surplus, which rose to 3.4 billion in 2024, Morocco was charged only with a 10% tariff – the lowest rate among the MENA countries. As a result, it maintains its advantage as a cost-effective firm’s destination in the wake of Trump’s second administration.
Morocco-China
Meanwhile, China’s investments in the country are increasing. Beijing has been strengthening its ties with Morocco since 2016, marking a new phase in bilateral relations. The visit in November by Xi Jinping, after the G20 summit in Brazil, represents a step forward in their economic relationship. Investments from Chinese companies in the electric vehicle (EV) and battery sector have achieved $10 billion in the last years.
In November 2024, the “Caisse de dépot et de gestion” (CDG) – a state-owned financial institution that manages long-term savings in Morocco – signed a Memorandum of Understanding with the Chinese giant Gotion High-Tech. They committed to the partnership for the construction of the Kenitra gigafactory project, a $1.3 billion battery production plant.
Morocco – Europe
The EU is closely watching Morocco’s growing industrial role and its links to China. In 2021, the European Commission investigated glass fibre fabrics (GFF) from China routed through Morocco. Chinese firms were importing raw materials, processing them locally, then exporting to the EU, in an attempt to overcome anti-dumping and anti-subsidy duties. Indeed, the EU took action to protect its automotive sector, increasing tariffs on China’s EVs to 45%.
Similarly, the EC has taken action against unfair trade practices involving imports of aluminium road wheels from Morocco. In 2023, the EU confirmed anti-dumping duties of 9% to 17.5%. Additionally, in March 2025, it added countervailing duties of 5.6% to 31.4% after finding illegal Moroccan subsidies, through grants, tax exemptions, and low-interest loans, incompatible with WTO rules. Financial contribution from China under the Belt and Road Initiative (BRI), directly benefiting one of the Moroccan exporters, further aggravated the situation.
These trade defence measures reflect the EU’s efforts to protect key industrial sectors from unfair trade practices. The GFF market alone represents an annual value of €300 million within the EU and supports over 2,000 jobs. Similarly, the European aluminium wheel industry employs approximately 17,000 people. The EU’s actions aim not only to safeguard these industries from immediate harm but also to address broader geopolitical dynamics. In particular, they target China’s strategy of gaining indirect access to the European market through third countries like Morocco. The combination of trade defense measures highlights the EU’s concern over this indirect penetration and its commitment to maintaining a level playing field in global trade.
Conclusion
The recent wave of tariffs on China has further accelerated the regionalisation of Chinese supply chains in Morocco. The country’s strategic location near Europe, combined with its free trade agreement with the EU, positions it as a gateway to the European automotive market. This has made Morocco an increasingly attractive base for Chinese firms seeking to bypass trade restrictions.
China’s expansion into third countries to overcome internal and external trade barriers is already visible. A clear example is Mexico’s response to U.S. pressure to tighten generous incentives for carmakers, highlighting the global competition between the two largest economies. Morocco now finds itself in a similar position, caught between growing foreign investment and tightening Western protectionism.
As Morocco continues to industrialise, it must navigate these global trade dynamics carefully. The country faces the challenge of leveraging foreign investment without becoming merely a low-cost production zone. Success will depend on its ability to upgrade its industrial base, deepen domestic supply chains, and maintain balanced trade relationships with both East and West.
Questions:
- What mechanisms can the EU implement to differentiate between legitimate Moroccan exports and those used by third countries to circumvent trade regulations, without undermining Morocco’s industrial development?
- As global powers pressure trade partners to take sides, will Morocco—like Mexico—be forced to choose between its growing economic ties with China and its privileged access to Western markets?
- How will increased foreign investment in Morocco affect the status and autonomy of Western Sahara, especially given partial recognition of Moroccan sovereignty by countries like the U.S., France, and Spain?
Reading suggestions
- Apergi, M., Zimmermann, E., Weko, S., & Lilliestam, J. (2023). Is renewable energy technology trade more or less conflictive than other trade? Energy Policy, 177, 113538. https://doi.org/10.1016/j.enpol.2023.113538
- Auktor, G. V. (2022). The opportunities and challenges of Industry 4.0 for industrial development: A case study of Morocco’s automotive and garment sectors. Deutsches Institut f. Entwicklungspolitik.
- Bayssi, O., Nabil, N., Azaroual, M., Bousselamti, L., Boutammachte, N., Rachidi, S., & Barberis, S. (2024). Green hydrogen landscape in North African countries: Strengths, challenges, and future prospects. International Journal of Hydrogen Energy, 84, 822–839. https://doi.org/10.1016/j.ijhydene.2024.08.277