Trump’s tariffs are particularly destructive for German carmakers

President Donald Trump’s decision to impose a 25% tariff increase on all imported automobiles—set to take effect next week—has ignited sharp reactions across the global automotive industry, triggering concerns among European, Japanese, Korean, and even American manufacturers. Tesla seems to have gained the most from these measures, but Western and Asian countries are warning of a scenario where it will be “losers only.”

Following the announcement of the new tariffs, the German Association of the Automotive Industry (VDA) quickly condemned them as a “fatal signal for free trade,” emphasizing that the significant increase from the previous 2.5% tariff to 27.5% would severely disrupt global supply chains. 

Ferrari prices rise by 10%

This hike is particularly damaging for German manufacturers. Of the 784,889 European cars exported to the US last year, 446,566 – almost 57% –were built in Germany, according to US Department of Commerce data.

Audi and Porsche, for instance, whose entire range of luxury models are manufactured outside the United States, primarily in Germany and Eastern Europe, see the strain rising substantially.

To those brands, the US is the second-most important market, and it proved a lifebuoy last year after a steep decline in their dominant marketplace, China, where the peak in customer interest is over.

Italy’s luxury brand Ferrari immediately prompted a price adjustment strategy for the US market. Ferrari plans a selective price increase of up to 10% on most models, though its premium lines—296, SF90, and Roma—will remain unaffected.

Ferrari is probably one of the few brands with a customer pool capable of absorbing the excess duties. Therefore, it remains optimistic about achieving its 2025 financial targets, also citing its ability to share costs with dealerships.

American brands not immune

However, the automotive industry widely perceives these tariffs as destructive. Sigrid de Vries, head of the European Automobile Manufacturers’ Association (ACEA), emphasizes the global negative implications, including for US automakers. ACEA has called for immediate negotiations between the US and the EU to avoid further economic fallout.

Indeed, American manufacturers are not immune from the effects. Industry giants Ford, GM, and Stellantis expressed their concerns through the American Automotive Policy Council (AAPC), underscoring the risk of rising consumer prices. They advocate for maintaining the competitiveness of the North American automotive market.

Mexico, home to 37 automotive factories and exporting 80% to the US, has announced it will respond on April 3rd with countermeasures. President Claudia Sheinbaum said she aimed for “preferential treatment for Mexico.” Her country supplies 40% of all the car parts in the US.

A win for Tesla?

Tesla CEO Elon Musk, traditionally an ally of Trump, also warned that these tariffs could significantly increase production costs due to reliance on imported parts. However, on the news, Tesla stock prices rose 4%, as all Tesla vehicles sold in the US are locally produced in Texas and California. 

According to estimates, half of the best-selling Tesla Model Y competitors are subject to the tariffs and will lose their pricing edge. The President maintains he did not consult Musk over the tariffs to avoid a conflict of interest, which sounds questionable since he recently organized a showroom party for Tesla at the White House.

Foreign nations are lashing out at Tesla. Canada has announced that it will scrap the brand from its EV incentives. Likewise, the UK government is considering removing US carmakers from its rebate program for emission-free vehicles, notably Tesla.  

The British automotive industry, however, hopes a bilateral agreement can be reached. “Rather than imposing additional tariffs, we should be exploring ways to create opportunities for British and American manufacturers…” reacted Mike Hawes, chief executive of industry association SMMT, and “…urges both parties to consult immediately and reach a mutually beneficial agreement.”

Up to 50%?

The repercussions extend beyond Europe. Canadian Prime Minister Mark Carney labeled the tariffs “a direct attack on Canadian workers,” pledging to defend his nation’s automotive industry.

The nation is investigating a deeper tie-up with Europe for the automotive trade but was ignited by the news President Trump threatened even harsher taxes, potentially reaching 50%.

“If the European Union works with Canada to do economic harm to the US, large scale tariffs, far larger than currently planned, will be placed on them both to protect the best friend that each of those two countries has ever had,” he said in a post on Truth Social. 

The announcement was a seismic shift for Japan, which exports nearly one-third of its vehicles to the US annually, reaching 1.3 million units. The country has indicated it may respond with retaliatory measures. Toyota and Hyundai have already seen sharp declines in their stock prices following Trump’s announcement.