Trump’s 25% tariff on auto imports jolts equity markets and draws backlash, with European industry groups warning of supply chain shocks, rising prices, and job risks while analysts flag earnings pressure.
ADVERTISEMENTUS President Donald Trump slapped a 25% tariff on all auto imports starting next week, with auto parts to follow by 3 May 2025, sending shockwaves through global markets.
The move drew swift condemnation from European leaders and industry stakeholders.
The White House defended the decision on national security grounds, citing continued risks posed by foreign automotive imports to the US industrial base.
“I find that imports of automobiles and certain automobile parts continue to threaten to impair the national security of the United States and deem it necessary and appropriate to impose tariffs,” the White House statement said.
The reaction across the Atlantic was swift and severe. German Economy Minister Robert Habeck called for a strong and unified European response, stating: “The EU must now give a firm response to the tariffs—it must be clear that we will not back down in the face of the USA.”
The German Association of the Automotive Industry (VDA) warned of serious economic fallout.
Its president, Hildegard Müller, said the tariffs send “a disastrous signal for free, rules-based trade” and risk disrupting tightly integrated global supply chains.
“The consequences will cost growth and prosperity on all sides,” she added, urging urgent US-EU negotiations to avert further escalation.
Ties between Germany and the US
Müller highlighted the deep economic ties between the German auto industry and the US. German firms employ around 138,000 workers in the US, including 48,000 in manufacturing and 90,000 in parts supply. Of the more than 900,000 vehicles produced in the USA, around half are exported all over the world.
“The USA is an important component of the German automotive industry’s production network, and the global market is also served from there,” the VDA statement said.
A recent VDA survey of medium-sized automotive firms showed that 86% expect to be affected by the tariffs—32% directly and 54% indirectly through supplier and customer networks. The association emphasised that such disruption could endanger the global production model that underpins the industry’s competitiveness.
The European Automobile Manufacturers’ Association (ACEA) added its voice to the chorus of concern, warning that the new tariffs come at a “watershed moment” for an industry undergoing a complex transition toward electrification, digitisation, and sustainability, amid intensifying global competition.
“European automakers have been investing in the US for decades, creating jobs, fostering economic growth in local communities, and generating massive tax revenue for the US government,” said Sigrid de Vries, Director General of ACEA.
ACEA highlighted that many European automakers produce vehicles in the US, exporting 50% to 60% of that output to international markets.
“The EU and the US must engage in dialogue to find an immediate resolution to avert tariffs and the damaging consequences of a trade war,” de Vries added.
ADVERTISEMENTAnalysts warn of rising car prices
Wall Street analysts flagged the risk of higher vehicle prices for US consumers.
Goldman Sachs analyst Mark Delaney said in a note that imported car prices could rise between $5,000 and $15,000 (€4,600–€13,800) depending on the vehicle.
Even US-assembled models could see cost increases of $3,000 to $8,000 (€2,800–€7,400) due to the use of foreign-sourced components.
Assuming that roughly 50% of parts in US-made cars are imported, tariffs on auto parts could significantly raise production costs.
ADVERTISEMENTDelaney cautioned that while tariffs on parts will be phased in by May, the lack of clarity on which components are covered adds further uncertainty.
“We continue to believe that tariffs are a downside risk to earnings,” Delaney said.
Delaney said the impact on US automakers would vary. Tesla and Rivian, which manufacture entirely within the US, are relatively insulated. Ford is estimated to produce 80% of its US sales volume domestically, while General Motors sources 60–70% locally, though both companies also export from the US and maintain complex global supply chains.
In contrast, some European carmakers stand to lose significantly more. According to the US investment bank, Volvo Cars and Porsche are the “most exposed to any increase in US/EU tariffs”.
ADVERTISEMENTAutomaker stocks plummet
European automobile producers were the hardest hit in Thursday’s trading.
Shares of Porsche AG plunged 5.4%, followed by Mercedes-Benz AG (-4.8%), Ferrari (-4.7%), BMW AG (-3.7%), and Volkswagen AG (-2.9%).
Swedish manufacturer Volvo AB, which lacks significant US-based production, dropped 1.3%, while auto parts makers Continental AG and Pirelli each fell around 2%.
The sell-off spread to US stocks as well. General Motors and Ford declined 7% and 3.7% respectively in premarket trading, while Tesla slipped 1.7%, reflecting broader concerns about the industry’s ability to absorb new cost pressures without damaging demand or margins.
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