Europe Reacts Strongly to Trump’s Auto Tariffs and Their Economic Impact

FRANKFURT, Germany (AP) — European car manufacturers, already facing slow economic growth and increasing competition from China, have expressed strong opposition to the recent 25% import tax on vehicles announced by President Donald Trump. This tax is viewed as a significant burden that will have negative effects on businesses and consumers on both continents.

The European Automobile Manufacturers' Association stated that the tax “will hurt global automakers and US manufacturing at the same time.” This reflects concerns over the economic harm this tariff could inflict.

Hildegard Müller, head of Germany's auto industry association (VDA), emphasized that these tariffs would negatively affect car manufacturers and the extensive global supply chains linked to them, resulting in adverse impacts for consumers, particularly in North America.

“The consequences will cost growth and prosperity on all sides,” Müller stated, highlighting the urgency of addressing this issue.

The stakes are high for major automotive players, including Volkswagen, BMW, and Mercedes-Benz, along with a vast array of suppliers that contribute substantially to Europe's economy. The United States is the primary export market for the European automobile sector, with European companies exporting €56 billion worth of cars and parts to the U.S. in 2023.

The automotive sector in Europe supports around 13.8 million jobs, making up 6.1% of total employment in the EU. However, European car manufacturers are already contending with a shrinking domestic market and rising competition from cheaper electric vehicles from China, which raises concerns that any disruptions in the automotive industry could further damage an already fragile European economy. For instance, the economy did not grow at all in the last quarter of 2024 and posted only 0.9% growth for the entire year.

The German and Italian automotive industries are particularly vulnerable because a notable percentage of their exports, 24% for Germany and 30% for Italy, go to the U.S. These countries are home to key car manufacturers, including many of Europe's leading brands.

According to analyst Clarissa Hahn at Oxford Economics, if these tariffs are implemented, it could lead to a significant decline in exports, estimating a 7.1% drop for Germany and 6.6% for Italy.

While American car manufacturers face a lesser threat from retaliatory measures—exporting just 2% of their production to the EU—companies like Ford and General Motors saw their stocks decline sharply, highlighting their heavy reliance on cross-border trade practices.

In response to the tariffs, the European manufacturers’ association has urged for immediate dialogue between the EU and the U.S. to find a resolution and avoid the damaging effects of a potential trade war. Müller has called for swift negotiations to establish a bilateral agreement that provides a platform for addressing various tariff and non-tariff barriers affecting the automotive sector, aiming for a more balanced approach moving forward.

Europe, Tariffs, Automakers