US President Donald Trump announced a massive increase in import tariffs for European cars and trucks to 25 percent via social media.
• US President Donald Trump announces an increase in tariffs for EU vehicles to 25 percent next week
• The reason is a lack of compliance by the European Union with existing trade agreements
• Auto stocks under fire
US President Donald Trump is causing a political earthquake on global markets. The head of state announced on Friday via the Truth Social platform that the United States would raise tariffs for cars and trucks imported from the European Union to 25 percent starting next week. “I am pleased to announce that next week I will increase tariffs on cars and trucks from the European Union to 25 percent,” Donald Trump told his supporters and the international community. The primary reason he cited was that the European Union was “not living up to our fully agreed trade deal.”
Focus on US production: “No Tariff” for local manufacturing
In his statement, Donald Trump explicitly emphasized that vehicles produced in American factories would remain exempt from the new taxes. “It is completely clear and agreed that there will be NO TAXES if they produce cars and trucks in US factories,” Donald Trump told the affected manufacturers. The President referred to investments totaling over $100 billion that are currently being invested in the construction of new production facilities on US soil. The goal of this protectionist strategy is to strengthen domestic industry and create jobs for American workers.
Consequences for German car manufacturers and investors
The announced tariff increase is likely to put pressure on export-oriented German manufacturers such as Volkswagen, BMW and Mercedes-Benz in particular, as the USA is one of their most important sales markets. In the short term, higher import costs could weigh on margins or require price increases, which would impact competitiveness. At the same time, existing and planned production sites in the USA are moving strategically to the fore, as locally manufactured vehicles are to remain exempt from tariffs. This increases uncertainty for investors: While companies with strong US manufacturing tend to be more robust, stocks with a high dependence on exports could fluctuate more. Overall, increased volatility is to be expected for auto and supplier stocks until it becomes clear whether there will be countermeasures from the EU or negotiations.
Car stocks are already reacting in US trading
On Friday, the affected stocks were unable to react to the news in Europe due to the holiday, but the consequences are already evident in US trading: The prospect of higher tariffs has already weighed on the prices of European car manufacturers in US trading. The Stellantis price on the New York Stock Exchange fell by 1.7 percent, while Ferrari lost 1.5 percent. Depositary receipts (ADR) from Volkswagen and Mercedes also fell. The move comes at an inopportune time for the already struggling European auto industry: Rising raw material prices as a result of geopolitical tensions are increasing production costs, while a weaker economy could dampen demand. The European industry index of automobile manufacturers and suppliers has already lost more than 13 percent since the beginning of the year and is only just above its multi-year low from March.
EU promises countermeasures
The EU reserves the right to take countermeasures if US President Donald Trump raises tariffs as announced. A spokeswoman for the EU Commission emphasized that they remain committed to a predictable and mutually beneficial transatlantic relationship. However, if the US takes measures that contradict the common trade agreement, the EU reserves “all options to protect the EU’s interests.” At the same time, the Commission pointed out that the EU was fulfilling its obligations and was in close contact with the US government.
Sharp criticism from the industry
The President of the Association of the Automotive Industry, Hildegard Müller, has sharply criticized the announced increase in US tariffs on car imports from the EU and warned of significant consequences. US President Donald Trump’s plans to increase tariffs on cars and trucks from the European Union to 25 percent represent a “serious burden on transatlantic relations.” The additional duties would hit the German and European automotive industries hard in an already tense situation and could also have an impact on consumers in the USA. Müller called on both sides to adhere to the trade agreement concluded between the EU and the USA and called on Washington and Brussels to de-escalate and engage in rapid talks.
Framework agreement between USA and EU under pressure
Last summer, Trump and EU Commission President Ursula von der Leyen agreed in a framework agreement on an upper limit of 15 percent on most EU goods imports to the USA. This sentence should also apply to European cars and car parts. In return, the EU committed to eliminating tariffs on US industrial goods and easing market access for US agricultural products such as pork and dairy products. However, implementation of the agreement was slowed by further tariff threats and political tensions.
Alexandra Hesse, Claudia Stephan, finanzen.net editorial team with material from dpa-AFX
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