President Trump’s decision to implement significant tariffs on automobiles has provoked a strong backlash from German and French leaders, urging the European Union to respond decisively. They argue these measures could negatively impact both the U.S. and Europe, and disrupt global trade dynamics.
On Wednesday, Mr. Trump announced a hefty 25 percent tariff on imported cars and car parts, targeting major U.S. trade partners worldwide. These tariffs, which he deemed permanent, are slated to begin on April 3.
French President Emmanuel Macron expressed his disapproval in a conversation with Mr. Trump, labeling the tariffs as a “bad idea.” He mentioned France’s intention to collaborate with the European Commission to counteract the tariffs, aiming to reach an agreement that might persuade the U.S. president to reconsider.
Germany, with its robust auto industry facing a significant challenge, echoed this sentiment. Economy Minister Robert Habeck emphasized the need for the EU to deliver a strong response, insisting that they must stand firm.
Germany’s Chancellor Olaf Scholz also criticized the tariff move, describing it as misguided. He warned that the U.S. was heading down a path that ends in losses for all parties involved, arguing that isolationism and tariffs hinder prosperity.
The American market is vital for leading German automotive brands like BMW, Mercedes-Benz, and Volkswagen, which have long been under Mr. Trump’s scrutiny.
Both Mr. Habeck and Mr. Macron cautioned that the tariffs could disrupt growth and supply chains on both sides of the Atlantic and amplify inflation in the U.S. Mr. Macron pointed to the U.S. stock market’s reaction as an indication that these are unfavorable economic policies.
According to Mr. Habeck, the tariff news spells trouble not only for German automakers and the EU but also for the U.S. He stated that Germany is committed to supporting the European Commission in its negotiations with the U.S. to avoid a tariff standoff.
The announcement also had immediate effects on the market, leading to a drop in shares of German automotive companies Thursday. Italian luxury carmaker Ferrari and Swedish manufacturer Volvo experienced declines too, affecting parts makers and tire producers like Pirelli and Continental.
BMW responded with a statement on Thursday, highlighting that a trade war offers no benefits. They urged for a trans-Atlantic agreement that encourages growth and stops the rise of isolation and trade barriers.
BMW, Mercedes-Benz, and Volkswagen account for approximately 73 percent of the EU’s automotive exports to the U.S., according to JATO Dynamics. Mexico is the birthplace of many Volkswagen vehicles, while the EU remains the main origin for Mercedes-Benz sold in the U.S.
Analysts suggest that a prolonged trade conflict might spark additional retaliatory actions from impacted nations. European carmakers have limited options to shift production to their U.S. factories, confronting them with the dilemma of swallowing the tariff costs or passing them onto customers, potentially increasing vehicle prices by up to $12,000. Such inflation might pressure the Trump administration to rethink its stance.
Analysts from Barclays have noted that Porsche, a subsidiary of Volkswagen, may feel these tariffs more acutely compared to its European peers as its entire U.S. sales are imports. However, luxury brands like Ferrari, producing exclusively in Italy, predict minimal impact and plan to raise prices by as much as 10% to counteract tariff costs.
The European Automobile Manufacturers’ Association warned that these tariffs hit the industry during a time of significant transformation and increasing global competition.
Sigrid de Vries, the group’s director general, highlighted the long-standing investments by European automakers in the U.S., which have been crucial in creating jobs, stimulating local economies, and generating substantial tax revenue.
Hildegard Müller, president of the German automotive lobby group VDA, condemned the tariffs as a severe threat to free trade and adherence to established rules, cautioning about the high risk of a worldwide trade war with widespread repercussions for jobs, economic growth, and consumer prices.
