Shockwaves Hit German Auto Industry Amid US 25% Tariffs

The German auto industry is reeling after the announcement by US President Donald Trump on March 26, 2025, imposing a 25% tariff on all imported cars and light trucks. This decision poses a massive challenge for European imports, especially from Germany, as current US tariffs are only at 2.5%. The tenfold increase will significantly impact the sector. Meanwhile, the EU also has trade levers against the US in the automotive sector, with current tariffs on American trucks and pick-ups at just 13%. They could potentially raise these tariffs to 25%, though it wouldn’t match the same level of disruption expected within their own automotive industry. According to recent estimates by the German Institute for World Economics (IfW Kiel), German manufacturing would be severely affected by the 25% tariffs, leading to a potential 4% decrease in nominal production in the automotive sector alone. Exports of German vehicles might drop by 20%. The US market is crucial for German automakers, exporting around €35 billion worth of goods annually. Cars and engines account for nearly €28 billion, making them the most significant component. Porsche faces particular challenges due to its lack of US production facilities, with over a quarter of its sales occurring in North America. Stock prices of major German automakers like Porsche, BMW, Mercedes-Benz, and Volkswagen have fallen significantly since January 2025. Germany represents approximately 60% of the EU’s exports to the US in this sector, shipping about 400,000 vehicles across the Atlantic in 2023. With roughly 900,000 vehicles produced locally by German manufacturers in the US that year, domestic production far exceeds direct exports. Around 138,000 jobs in the US depend on German automakers and suppliers. Current tariff regimes vary significantly between passenger cars and commercial vehicles, highlighting areas of potential negotiation.