EU automakers face billions in losses due to Trump's tariffs – what is the market situation
Kyiv • UNN
Trump will introduce 25% tariffs on car imports, which will hit European manufacturers. Porsche and Mercedes may lose billions of euros in profits due to the new US duties.
US President Donald Trump has confirmed that he will impose 25% tariffs on car imports starting April 2. In this way, the American leader is trying to stimulate domestic production. For European car manufacturers, this could be a powerful blow that will force them to reconsider their entire business strategy in the face of new costs. UNN analyzed the situation on the European automotive market.
Details
Bloomberg reports that Porsche AG and Mercedes-Benz Group AG are among the leaders who will be affected by President Donald Trump's trade decision, as the potential damage from new US tariffs on imported cars could amount to €3.4 billion.
According to Bloomberg Intelligence, the additional 25% duty imposed by Trump could wipe out about a quarter of Porsche's and Mercedes' projected operating profit in 2026. To offset this impact, manufacturers may be forced to raise prices or move more production to the US.
Porsche and Mercedes shares have already fallen by 5.7% in Frankfurt, while BMW AG shares have fallen by 4.9%. Other manufacturers such as Volkswagen AG, which also owns Audi and Lamborghini, fell by 4.3%, and Aston Martin Lagonda Global Holdings Plc by 8.9% in London.
New US tariffs on car imports: Canada's reaction has appeared27.03.25, 06:48 • 38838 views
Are new tariffs from Trump dangerous
The tariffs imposed by Trump threaten to undermine the European automotive industry's dependence on exports to the lucrative US market. German carmakers are most at risk, as they ship more cars to the US than to any other country, including many of their high-margin internal combustion engine models. These include cars such as the Porsche 911 sports car and the Mercedes S-Class luxury sedan.
This move by Trump is also a "fatal sign for free trade based on rules". This was stated by the German Automotive Association VDA, calling on Brussels to negotiate an agreement with Washington. At the same time, it is not only car manufacturers that are affected - tariffs also threaten parts manufacturers, including Robert Bosch GmbH and Continental AG.
Most German carmakers have factories in the US, where they produce cars for both local buyers and for export. As the European Union weighs retaliatory measures, any escalation of the trade war could do even more damage to an industry already struggling with rising costs and subdued demand.
The MSCI ACWI Automobiles Index has lost $364 billion this year to close on Wednesday. In Europe, automakers have lost about €43 billion in market capitalization since their last peak in February, including Thursday's declines, as Trump's tariff push overshadowed optimism about increased spending in Germany and an economic recovery in Europe.
Euro fell to a three-week low due to Trump's tariffs on cars27.03.25, 03:10 • 21815 views
However, the established prices for cars already take into account possible difficulties caused by the new tariffs. Automobiles remain the cheapest manufacturing sector in Europe, trading at just 7.3 times forward earnings, which is 50% lower than the European stock market.
Blow to Porsche
Porsche, which is struggling with declining sales in China, may prove to be the most vulnerable. The luxury carmaker has grown steadily over the past 15 years in the US, which has just overtaken China as its largest sales market. But Porsche's American dealers are completely dependent on imports, as the manufacturer does not have a factory there.
Porsche's market value of around €44 billion is now less than half of what it was in May 2023, when the company's shares peaked after one of Europe's largest IPOs in recent years. The sharp decline is putting additional pressure on CEO Oliver Blume, who runs both Porsche and Volkswagen.
The situation at other automakers
While disappointing demand for Porsche's electric vehicles is plaguing the company in China, where deliveries fell 28% last year, the problem is less acute in the US. Electric vehicle adoption is slower there, and American consumers have bought more Porsches in every year but one since 2009. The only year of decline was 2020, when the Covid-19 pandemic began.
Stellantis NV has an established manufacturing network in the US that produces Jeep, Dodge, Chrysler and Ram models, while Renault SA has suffered the least, as its sales are mainly in Europe. Earlier this month, BMW said it expects escalating trade conflicts between the US, Europe and China to cost the automaker around €1 billion this year, but that estimate does not take into account Trump's recent tariffs.
Although auto industry executives have long lobbied against tariffs - including those imposed by the EU on Chinese-made electric vehicles - most are currently taking a wait-and-see approach as negotiations between Brussels and Washington continue. However, even a short period with tariffs will hurt automakers.
"Tariffs place a heavy burden on companies and the industry's closely intertwined global supply chains," said VDA President Hildegard Müller. This step has "negative consequences for consumers, especially in North America."
The Chinese car brand BYD is considering building a factory in Germany17.03.25, 19:10 • 72791 view
