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

Donald Trump has repeatedly threatened to impose greater tariffs on automobiles and light-weight vehicles imported into the US from overseas. And sometimes he has backed away, stating only recently that there can be no “product-specific” tariffs.

Now, the US president has once more modified his thoughts, asserting on Wednesday (March 27){that a} 25% import levy on foreign-made automobiles will ultimately take impact  April 2. Additionally, Trump did not dominated out the potential of imposing tariffs on different industries as effectively, such because the pharmaceutical sector.

Donald Trump believes that import tariffs for international 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 unique conclusion. He estimates the determine shall 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 lift their costs this might make “new vehicles something of a luxury item,” he wrote in a be aware to buyers. 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 unhealthy 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 doubtless deal a extreme blow.

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

Luxury sports activities automobile maker Porsche, already battling declining gross sales in China, could possibly be significantly affected. Over the previous 15 years, the Stuttgart, Germany-based firm has seen regular development within the US — a market that has now surpassed China as Porsche’s most vital export vacation spot. Adding to the problem, Porsche sellers within the US are completely 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 income of Volkswagen, BMW, and different main German automakers within the profitable US market. Besides carmakers, key suppliers akin to Bosch and Continental may additionally really feel the squeeze.

Auto shares tank amid fears of intensifying commerce struggle

Stock markets responded promptly on Thursday (March 27) morning. Porsche shares dropped by as much as 5% on the German inventory trade 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 trade on excessive alert

Hildegard Müller, president of the German Association of the Automotive Industry (VDA), reacted strongly to Trump’s announcement, saying in an announcement 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 damaging 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), informed information company Reuters that the BGA can 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 beneath 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 slightly 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 cause for rapid panic, sharing the idea that the financial results of the tariffs shall 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 informed DW, and proposed the joint use of “retaliatory measures.”

This article was initially written in German.