According to a Reuters report on March 27, the German Minister of Economic Affairs and the German Association of the Automotive Industry (VDA) have strongly condemned U.S. President Donald Trump's latest decision to impose a 25% tariff on imported vehicles. They argue that this move will harm the economic interests of both Europe and the U.S. and call for immediate negotiations to prevent a further escalation of the trade war.
On March 26, Trump announced that the new 25% tariff on imported cars and light trucks would take effect next week. Notably, this tariff will be added to the existing 2.5% base tariff on imported vehicles in the U.S. and will apply to cars and trucks produced in countries with free trade agreements with the U.S., including Canada, Mexico, and South Korea.
Volkswagen Group is expected to be the most affected German automaker due to its extensive supply chain in Mexico and the lack of production facilities for its Audi and Porsche brands in the U.S.
Following Trump's tariff announcement, Volkswagen's stock price dropped by 5.1%, while shares of Mercedes-Benz, BMW, and Daimler Truck declined by approximately 3.5%. Meanwhile, shares of automotive parts supplier Continental AG fell by 2.9%.
German Minister of Economic Affairs Robert Habeck stated, "The EU must respond firmly to Trump's tariff policy. We must make it clear that we will not back down in the face of the U.S."
The VDA described Trump's new tariff policy as a "fatal blow" to rules-based free trade and warned that it would harm businesses and disrupt global supply chains. VDA President Hildegard Müller emphasized in a statement, "The German automotive industry calls for immediate negotiations between the U.S. and the EU on a bilateral agreement."
However, according to the Frankfurter Allgemeine Zeitung, a study by the Kiel Institute for the World Economy (IfW) suggests that Germany is not the country most severely affected by the U.S. tariff policy. The study estimates that in the first year after the tariffs take effect, Germany's GDP will decrease by 0.18%, whereas Mexico will suffer a 1.81% loss, and Canada will face a 0.6% decline. IfW trade economist Julian Hinz commented in an interview, "Overall, since cars are generally sold close to where they are produced, the impact of export losses is relatively limited."
