Chethana Janith, Jadetimes Staff
C. Janith is a Jadetimes news reporter covering science and geopolitics.
President-elect Donald Trump’s pledge to impose a blanket tariff on all goods coming into the U.S. could wreak havoc for European carmakers.
For Germany, the prospect of U.S. tariffs on European autos comes at a time when its top original equipment manufacturers, or OEMs, are already reeling.
Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, said Germany’s auto sector appears to be significantly exposed to Trump’s tariff threats.
President-elect Donald Trump’s pledge to impose a blanket tariff on all goods coming into the U.S. could wreak havoc for European carmakers, with Germany’s crisis-stricken automotive sector thought to be particularly vulnerable.
Speaking on the campaign trail in late September, Trump announced his desire to turn Germany’s auto giants into American car firms.
“I want German car companies to become American car companies. I want them to build their plants here,” Trump said in Savannah, Georgia. He added that the word tariff was “one of the most beautiful words I’ve ever heard” and “music to my ears.”
Trump has since announced plans to introduce new tariffs on China, Canada and Mexico in one of his first acts in office. The measures consist of an additional 10% tariff on all Chinese products coming into the U.S. and a 25% tariff on all goods coming from Canada and Mexico.
Europe wasn’t mentioned in Trump’s first tariff announcement but European Union policymakers will likely be worried that it’s just a matter of time before the president-elect turns his attention to the 27-nation bloc’s auto sector.
For Germany, the prospect of U.S. tariffs on European autos comes at a time when it’s top original equipment manufacturers, or OEMs, are already reeling.
Volkswagen, Mercedes-Benz Group and BMW have all issued profit warnings in recent months, citing economic weakness and sluggish demand in China, the world’s largest car market.
Rico Luman, a senior sector economist specializing in transport and logistics at Dutch bank ING, highlighted that Germany's auto sector is significantly exposed to potential U.S. tariff measures.
As Europe’s largest exporter of passenger cars to the U.S., Germany accounted for €23 billion ($24.2 billion) worth of car exports last year, making up 15% of its total exports to the U.S., according to data compiled by Eurostat and ING Research. The possible imposition of tariffs on German carmakers could worsen an already challenging situation.
“This is the core of the manufacturing industry,” Luman explained during a discussion. “The automotive sector is deeply connected to other industries like steel and chemicals, involving a vast supply chain.”
A spokesperson for the German government declined to provide a comment.
Volkswagen, BMW, and Mercedes-Benz at Risk
While some analysts suggest that recent U.S. political rhetoric about transforming German car companies into American firms may not be entirely literal, they acknowledge that additional tariffs could exacerbate existing pressures on the global automotive sector.
“It might have been campaign rhetoric, but there will likely be some push against imports, whether through tariffs or other unilateral actions,” noted Michael Robinet, executive director of automotive consulting at S&P Global Mobility.
However, Robinet pointed out a significant challenge: “The U.S. unemployment rate is still hovering around 4%, making it difficult to generate a substantial amount of additional domestic work in this industry.”
Germany’s auto industry faces critical challenges as it navigates both international trade tensions and a rapidly evolving global market.
U.S. Tariff Proposals Add Pressure to Global Trade Dynamics
Separate from tariffs proposed on China, Canada, and Mexico, the U.S. president-elect has signaled a plan to impose a blanket 10% or 20% duty on all imports into the country. However, it remains uncertain whether this pledge will materialize into official U.S. policy.
“We are closely evaluating the potential tariffs,” a spokesperson for Volkswagen stated. The Wolfsburg-based automaker highlighted that over 90% of the vehicles it sells in the U.S. are already produced in North America, meeting duty-free criteria under the USMCA (United States-Mexico-Canada Agreement).
Despite this, proposed tariffs on Canada and Mexico could effectively dismantle the USMCA framework, creating further complications for automakers operating in North America.
Mercedes-Benz, meanwhile, noted its significant U.S. presence, employing over 11,000 people and operating 12 key facilities for passenger car and van production. “We are committed to constructive dialogue with the incoming U.S. administration,” a spokesperson said.
BMW, which chose not to comment directly on tariff concerns, maintains operations in around 30 locations across 12 U.S. states, including the world’s largest BMW production plant in Spartanburg, South Carolina.
Stock performance for Germany’s automotive giants has reflected industry challenges, with shares of Volkswagen and BMW dropping approximately 23% year to date and Mercedes-Benz Group shares down around 13% over the same period.
Navigating Uncertainty: Challenges and Opportunities
“Trump wants more tariffs, so companies need to be prepared,” said Julia Poliscanova, senior director for vehicles and e-mobility supply chains at Transport & Environment.
Poliscanova emphasized the need for Europe to stay committed to its own strategic goals, including the European Green Deal and electrification initiatives. “While Trump's actions could delay progress on clean tech and EVs in the U.S., Europe has an opportunity to accelerate,” she stated.
“Though it will create short-term difficulties, particularly for German automakers, Europe must focus on advancing its industrial and environmental interests without slowing down,” she concluded.
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