German automakers brace for impact as Trump eyes tariffs

The expectation that President Donald Trump is revving up to follow through on his tariff plans is drawing major concerns among German automakers now that he has officially assumed office. 

Digging in: Trump has vowed to impose tariffs on goods imported from Canada and Mexico as early as Feb. 1, unless the countries enact stronger measures to stop the flow of unauthorized migrants and illegal drugs into the country. German automakers warn that the levies would drive up the cost of new vehicles for US consumers and lead to higher inflation.

• Volkswagen Group—which recently released a statement expressing concerns about the tariffs—operates one of its largest manufacturing sites in Mexico as a critical part of its supply chain. 

• Volkswagen’s factory in Mexico, located in Puebla, made nearly 350,000 vehicles in 2023 (including the Jetta, Tiguan, and Taos), all for export to the US.

• The investment advisory company, Stifel, estimates that around 65% of the cars that VW sells in the U.S. would no longer be competitive under the levies.    

What they’re saying: “The Volkswagen Group is concerned about the harmful economic impact that proposed tariffs by the U.S. administration will have on American consumers and the international automotive industry,” said a VW spokesperson.

Digging deeper: Volkswagen joins a growing number of entities with ties to the global automotive industry that have expressed concerns about the tariffs expected to be imposed by President Trump.    

• Canadian officials have said the 25% tariffs on goods from Canada would harm the US car industry.

• Canadian officials' threat to impose tariffs on US goods if Trump proceeds with his tariff plans could impact 50% of the vehicles sold by the U.S. in the neighboring country.

Bottom line:  At this point, it seems very unlikely that President Trump will reverse his plans regarding the tariffs. Then again, anything is possible. Several of the entities that stand to be greatly affected by the tariffs, including Mexico, have expressed a willingness to work with the Trump administration to address the administration’s concerns. 

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