German automakers are bracing for a bigger hit after President Donald Trump announced plans to raise U.S. tariffs on cars imported from the European Union to 25%, prompting pushback from European trade officials.
The details: The move—reversing a deal reached last year that lowered U.S. duties on automotive imports to 15%—could deepen the tariff impact for several European automakers, particularly Volkswagen Group, Reuters reported.
Volkswagen Group, which includes Audi and Porsche, absorbed a 4-billion-euro ($4.7 billion) hit in 2025 due to U.S. tariffs.
Bernstein Research estimates the additional 10 percentage points in tariffs could cost German carmakers about 2.6 billion euros ($3.05 billion) in operating profit this year.
Additionally, Bernstein expects affected automakers to offset part of the increased cost through higher vehicle prices, potentially adding pressure on brands like Audi and Porsche, which saw U.S. Q1 retail sales fall 30% and 12%, respectively.
Why it matters: Higher tariffs could translate directly into higher vehicle prices, tighter supply, or both (particularly for import-heavy luxury brands), adding another layer of pressure in an already affordability-constrained market.
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Between the lines: Trump has tied the tariff increase to claims the EU failed to comply with bilateral trade agreements, an assertion European officials are disputing.
Bernd Lange, chair of the European Parliament’s international trade committee, said the move shows a lack of respect for EU sovereignty and highlights the unpredictability of U.S. trade policy.
Marcel Fratzscher, president of the German Institute for Economic Research, said Europe must take a tougher stance and “can no longer yield to pressure.”
For dealers: The near-term challenge may be managing potential price increases and shifting demand, especially if luxury buyers pull back further in response to rising costs.
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