Trump’s auto tariffs deal huge blow to German carmakers – DW – 03/27/2025 | EUROtoday

Donald Trump has repeatedly threatened to impose greater tariffs on automobiles and lightweight vans imported into the US from overseas. And now and again, he has backed away, stating only in the near past that there could be no “product-specific” tariffs.

Now, the US president has once more modified his thoughts, saying on Wednesday (March 27){that a} 25% import levy on foreign-made automobiles will finally take impact on April 3. Additionally, Trump did not rule out the potential for imposing tariffs on different industries as nicely, such because the pharmaceutical sector.

Donald Trump believes that import tariffs for overseas items will generate a further $100 billion (€92.7 billion) in income for the US authorities.

But Paul Ashworth, chief North America economist at Capital Economics in Toronto, Canada, has crunched the numbers and reached a distinct conclusion. He estimates the determine can be nearer to “just under $50 billion.”

In the quick time period, Ashworth warns, the tariffs will drive up costs. If US producers additionally resolve to boost their costs, this might make “new vehicles something of a luxury item,” he wrote in a word to traders. Consumers could choose to “hold onto their used vehicles for much longer, boosting prices of used vehicles too, plus demand for auto repair shops and parts.”

Premium carmakers set to undergo most

The new US levies are significantly dangerous information for Germany’s struggling carmakers. The US, together with China, is an important marketplace for Volkswagen, Mercedes, BMW, and Porsche, for whom falling abroad gross sales will probably deal a extreme blow.

According to calculations by information company Bloomberg, Trump’s extra tariffs may wipe out a couple of quarter of Porsche’s and Mercedes’ projected working earnings for 2026. To offset the affect, producers could have to boost costs or shift extra manufacturing to the US.

Luxury sports activities automobile maker Porsche, already combating declining gross sales in China, may very well be significantly affected. Over the previous 15 years, the Stuttgart, Germany-based firm has seen regular progress within the US — a market that has now surpassed China as Porsche’s most essential export vacation spot. Adding to the problem, Porsche sellers within the US are solely reliant on imports, as the corporate has no manufacturing plant there.

In 2024, the US imported almost $25 billion value of automobiles from Germany, in response to figures from the US Department of Commerce’s International Trade Administration. Now, these tariffs threaten to considerably erode the earnings of Volkswagen, BMW, and different main German automakers within the profitable US market. Besides carmakers, key suppliers corresponding to Bosch and Continental may additionally really feel the squeeze.

Auto shares tank amid fears of intensifying commerce conflict

Stock markets responded promptly on Thursday (March 27) morning. Porsche shares dropped by as much as 5% on the German inventory change in Frankfurt, whereas Mercedes shares tanked 5.2% and BMW’s inventory declined by 4.9%.

Volkswagen AG, which owns Audi and Lamborghini, misplaced as much as 4.3%, and even UK carmaker Aston Martin Lagonda Global Holdings Plc in London plunged 8.9%.

In the opening minutes of buying and selling, Germany’s benchmark DAX index fell 1.54% to 22,488.09 factors, and the so-called MDAX index, which tracks mid-sized firms, misplaced 1.35%. On a European scale, the main eurozone index, EuroStoxx 50, shed 1.3%.

Auto business on excessive alert

Hildegard Müller, president of the German Association of the Automotive Industry (VDA), reacted strongly to Trump’s announcement, saying in a press release that the tariffs “send a disastrous signal for free and rules-based trade.”

She warned that they might “place a significant burden on both companies and the automotive industry’s closely interwoven global supply chains,” with destructive penalties for shoppers, not solely in Germany however “especially in the US.”

Dirk Jandura, president of the German Wholesale, Foreign Trade, and Services Association (BGA), instructed information company Reuters that the BGA could be revising its already pessimistic export expectations downward.

“We will now make a significant downward adjustment,” he stated, including that Trump “unilaterally started this trade war based on false claims.”

Jandura additionally referred to as on the European Union to reply decisively. “The EU should also address the dominant and overwhelming market power of American digital corporations in Europe,” he demanded.

Monika Schnitzer, chair of Germany’s Council of Economic Experts additionally sees the EU underneath stress to behave. “The European Commission should, of course, enter negotiations with the US government. But not by offering concessions, rather, by threatening countermeasures, including retaliatory tariffs,” the member of the federal government’s advisory panel stated.

How will Trump’s auto tariffs have an effect on the broader financial system?

Schnitzer believes although that in Germany the brand new tariffs will primarily affect automakers and their suppliers relatively than the broader financial system.

“The overall economic impact will be limited, but the affected industries and regions will feel the effects much more strongly. One thing is certain: the level of uncertainty will rise dramatically, and that alone will harm the economy,” she famous.

For now, she suggests a wait-and-see method as a result of, in her opinion, it “remains uncertain whether the announced tariffs will actually be imposed in this form and at this level.” Negotiations, she added, are nearly sure to happen.

Moritz Schularick, president of the Kiel Institute for the World Economy (IfW), additionally sees no motive for rapid panic, sharing the idea that the financial results of the tariffs can be “manageable for the broader economy.”

“As Europeans, we should align ourselves with other countries that want to maintain open markets and jointly advocate for a rules-based global economy,” he stated, and proposed the joint use of “retaliatory measures.”

This article was initially written in German.