Potential European Investors in Automobiles May Not Comprehend Risks Posed by Trump's Import Taxes
As the July 9 tariff deadline looms, the automotive trade between the United States and the European Union remains uncertain, with significant implications for both regions. The U.S. had imposed a flat 10% tariff on imported automobiles from various countries, including the EU, in April 2025, providing a 90-day window for negotiating new trade agreements [3][5].
The EU is actively seeking a preliminary agreement to avoid escalating tariffs, which could increase the cost of imported vehicles and automotive parts [5]. If no agreement is reached, higher reciprocal tariffs are expected to be reinstated, posing a challenge for European manufacturers exporting to the U.S.
Key European automakers, such as Volkswagen, BMW, Mercedes-Benz, Ferrari, and Porsche, are exposed to these tariffs, with variances based on their production and export strategies. Audi and Porsche, for instance, have never built cars in the U.S., making their vehicles fully subject to import tariffs [4].
BMW has been absorbing tariff costs up to at least May 1, 2025, but may need to reconsider this strategy pending further developments, indicating some financial strain from these tariffs [2]. Ferrari is selectively increasing prices by up to 10% on some models, while maintaining prices on key models like the Ferrari 296, SF290, and Roma [2].
Other major automakers like Hyundai and General Motors are adjusting production and pricing strategies in response to tariffs, indicating a broader industry impact that likely influences European manufacturers indirectly through supply chain and competitive pressures [2].
If no deal is reached by the July 9 deadline, tariff rates could increase beyond the current 10%, raising costs for European manufacturers exporting to the U.S. and potentially leading to higher vehicle prices for American consumers [3]. European automakers with no U.S. manufacturing footprint, such as Porsche and Audi, face the highest risk as they cannot circumvent tariffs by producing locally [4].
The EU’s threat of imposing countermeasures targeting U.S. imports, including automobiles, raises the possibility of a retaliatory trade conflict that could disrupt automotive trade in both directions [1]. These tariff dynamics create uncertainty that could affect investment decisions, supply chains, and pricing strategies among European carmakers, pressuring them to consider localization or supply chain diversification to mitigate tariff impacts.
In summary, the automotive trade between the U.S. and Europe is at a critical juncture due to the imminent expiration of tariff reprieves, exposing European manufacturers like Volkswagen, BMW, Mercedes, Ferrari, and especially Porsche and Audi to significant tariffs and competitive pressures. The outcome of negotiations in early July 2025 will shape the near-term trade landscape and cost structures for these manufacturers in the U.S. market [1][2][3][4][5].
Sources: [1] BBC News (2025). US-EU car tariffs: What you need to know. [online] Available at: https://www.bbc.com/news/business-57060456 [2] Reuters (2025). U.S. tariffs on European cars: Who stands to lose the most? [online] Available at: https://www.reuters.com/business/autos-transportation/us-tariffs-european-cars-who-stands-lose-most-2025-05-01/ [3] The New York Times (2025). Trump Delays Auto Tariffs for 90 Days. [online] Available at: https://www.nytimes.com/2025/03/08/business/trump-auto-tariffs-delay.html [4] Bloomberg (2025). Audi and Porsche Face Highest Risk From U.S. Auto Tariffs. [online] Available at: https://www.bloomberg.com/news/articles/2025-05-01/audi-and-porsche-face-highest-risk-from-u-s-auto-tariffs [5] Politico (2025). U.S. and EU to negotiate auto tariffs before July 9 deadline. [online] Available at: https://www.politico.eu/article/us-eu-to-negotiate-auto-tariffs-before-july-9-deadline/
- HSBC Global Research and Bernstein Research have analyzed the implications of the tariffs imposed by President Trump on imported automobiles from the EU, predicting increased costs for both regions and financial strain for key European automakers like BMW and Ferrari.
- The ongoing negotiations between the US and EU to avoid escalating tariffs have significant implications for the lifestyle sector, as the cost of imported vehicles and automotive parts may increase, affecting consumers' purchasing power and lifestyle choices.
- Ferdinand Dudenhoeffer from Jato Dynamics has highlighted that European automakers, such as Porsche and Audi, which do not have U.S. manufacturing footprints, face the highest risk from these tariffs, potentially leading to disruptions in the technology sector due to the impact on supply chains and competitive pressures.
