German auto industry's US challenge: Tariffs threaten exports
President of the German Automotive Industry Association (VDA), Hildegard Müller, described the US decision to impose tariffs on cars as "a fatal signal for free, rules-based trade." This decision impacts a significant export market for German manufacturers at a time when they're grappling with declining profits.
On Wednesday, President Donald Trump announced the introduction of 25 percent tariffs on cars from outside the US. The German automotive industry is alarmed by this decision. The United States remains the most crucial sales market for the German automotive industry. Almost one in three Porsches and one in six BMWs sold in 2024 were destined for the North American market. For Volkswagen, Audi, and Mercedes, this share ranged between 12 and 15 percent.
No other economy imported as many new cars from Germany in 2024 as the US. The American market accounted for 13.1 percent of all German car exports, exceeding the United Kingdom (11.3 percent) and France (7.4 percent). According to VDA data, exports to the US increased compared to the previous year.
The decision to impose tariffs comes at an exceptionally unfavourable time for German companies. Volkswagen and Porsche's profits fell by 30 percent, and BMW faced an even larger decline of 37 percent. It is worth noting that until now, tariffs on car imports from the EU to the US were 2.5 percent, whereas the EU had imposed a 10 percent tariff on American cars.
Consequences for both sides of the Atlantic
Hildegard Müller, president of the German Automotive Industry Association (VDA), emphasizes in an interview with Bild.de that the new tariffs will have a negative impact not only on European manufacturers but also on the American economy.
— The announcement of high tariffs on cars and car parts is bad news for German carmakers, for the German economy, for the EU, but also for the US, — she said in an interview with the newspaper. The current customs policy of the US President has also faced criticism from American entrepreneurs.
The VDA president highlights that the transatlantic partnership and free and fair trade are of great economic importance to both sides and are a guarantor of growth, prosperity, and jobs across the Atlantic. The association calls for immediate negotiations between the US and the EU regarding a bilateral agreement.
European Commission President Ursula von der Leyen expressed deep regret over the American decision to impose tariffs on European car exports. At the same time, she assured that the EU would continue to seek a solution through negotiations.
The introduction of 25-percent tariffs presents a challenge both for companies and for the closely interconnected global supply chains in the automotive industry. Müller predicts that the negative effects will primarily impact consumers, including those in North America.
