Germany’s automotive industry pleaded for an urgent de-escalation in the tariff dispute between the US and the European Union and called for immediate talks between the two sides after President Donald Trump said he would increase auto tariffs on the bloc next week.
“The US-EU trade agreement has to be upheld by both sides,” said Hildegard Müller, the head of lobby group VDA, in an emailed statement on Saturday. “That also means that the EU has to finally ratify its end of the deal agreed to last summer.”
Trump said in a social media post on Friday he was raising tariffs on cars and trucks from the EU to 25%, claiming the EU had failed to fully comply with a trade agreement negotiated with the US.
The levies wouldn’t apply to automobiles built in US facilities, he said, adding that “It is fully understood and agreed that, if they produce Cars and Trucks in USA Plants, there will be NO TARIFF.”
“The costs of these additional tariffs would be enormous for the German and European automotive industries in already very challenging times, but would probably also have an impact on consumers in the US,” Müller said. The new duties would also pose a “renewed and serious strain on transatlantic relations,” she said.
Trump, speaking to reporters at the White House on Friday, reiterated his claim that the EU was “not adhering” to their agreement, without providing more details. The new levies would force their automakers to “move their factory production much faster” to the US, he said.
The EU is implementing its commitments in line with standard legislative practice and keeping the US administration fully informed throughout, a spokesperson said. The European Commission will seek clarity from the US and keep its options open to protect EU interests, the spokesperson said.
For the auto industry, Trump’s decision injects fresh volatility as companies are still adapting to the US president’s whipsawing trade policies from last year that significantly increased costs and squeezed profits for carmakers and their suppliers. Trump has pushed automakers to expand their US manufacturing operations by imposing tariffs on vehicles and parts that cross the border, even from countries with prior trade agreements.
Several major European automakers have assembly plants in the US, including Volkswagen AG, Mercedes-Benz Group AG and BMW AG. Stellantis NV has a significant US footprint as well, with factories producing Jeep sport utility vehicles, Ram pickups, Dodge muscle cars and other models.
Trump’s announcement Friday would “threaten the progress that has already been made to open EU markets and grow the US auto industry,” said Jennifer Safavian, president of Autos Drive America, a trade association representing automakers based outside the US. “We urge the administration and the EU to uphold the agreement made last year and work together to find a swift resolution.”
US shares of Stellantis, which imports Alfa Romeo, Fiat and Maserati models into the US from Europe, fell 2.1% in New York on Friday. US depositary receipts of VW also slid.
Higher tariffs risk additional pressure on German automakers such as BMW and Mercedes-Benz. Although those companies use the US as a major hub for SUV production and export, they still import other models such as the BMW 3 Series and Mercedes-Benz S Class sedans.
BMW told investors in March it sees little room for improving carmaking profitability this year due to tariffs and intensifying competition in China. A BMW spokesperson declined to comment.
The ratcheting up of tariffs on Europe comes as officials from the US, Mexico and Canada prepare to review their trade agreement this summer. Automakers have been pushing the administration for more tariff relief, and some foreign manufacturers who chose not to comply with content rules in the pact Trump signed in 2020 have faced double-digit duties on some models.
Trump’s decision renews a contentious trade fight with a major economic bloc even as the Iran war and the resultant spike in energy prices place fresh strains on the global economy.
Bernd Lange, who chairs the European Parliament’s trade committee, said that Trump’s behavior was unacceptable and that the EU is honoring the deal.
“The US has repeatedly breached the agreement,” Lange told Bloomberg on Friday, referring to US tariffs on steel and aluminum imports. “This latest move demonstrates just how unreliable the US side is.”
Lange reiterated that parliament is drafting legislation to ratify the trade deal with the US and hopes to finalise it in June.
Under their trade deal, the EU had agreed to erase levies on US industrial goods in exchange for a 15% tariff ceiling on most EU products. The bloc had accepted the lopsided deal in the hopes of keeping Trump engaged in Ukraine and avoiding a full rupture in trade relations.
Trump didn’t specify how he believed the EU had failed to honor their trade pact on Friday, but the agreement had faced challenges, complicating negotiations over implementation. While the two sides reached their agreement in July, EU lawmakers are yet to fully ratify the pact as they seek further amendments.
A key sticking point has been metals tariffs. In August, the US widened a 50% tariff on steel and aluminum to hundreds of new products. The move led to claims the US was violating recent commitments. Companies faced a difficult task calculating the tariffs, which were based on the percentage of these metals in their products.
EU lawmakers then twice paused the deal’s ratification — once after Trump threatened to take Greenland, a Danish territory, and again after the US Supreme Court invalidated the president’s global tariff regime.
More recently, however, the two sides had expressed a desire to finally adopt the trade deal, with the US agreeing to change how it calculated the broadened metals tariff.
