Trump Announces to Raise EU Auto Tariffs to 25%
Synopsis
US President Donald Trump has announced he will raise tariffs on European cars and trucks from 15% to 25% next week, accusing the EU of not complying with last August's trade deal. The EU rejected the claim and said it would keep options open to protect its interests. Ford, Stellantis, and General Motors shares all fell on the news. European politicians and economists are calling for retaliatory tariffs. The move comes amid broader tensions between the US and EU over the Iran war and Europe's refusal to help reopen the Strait of Hormuz.
Donald Trump says he will raise tariffs on European cars and trucks from 15% to 25% next week while the EU has not complied with their trade deal. It has been dismissed in Europe and now the pressure is on to respond, and respond robustly.
Key Highlights
- Trump said he will push for 25% tariffs on European cars and trucks next week, up from the current 15%.
- The EU dismissed Trump’s claim that it had failed to live up to the terms of the trade agreement.
- After the announcement shares fell 2.4% for Ford, 3.3% for Stellantis and 1.5% for General Motors.
- The announcement follows increasing tensions regarding the war in Iran and Europe’s consistent refusal to assist in opening the Strait of Hormuz.
Trump Boosts EU Auto Tariff to 25%
On Friday, Trump announced via social media that he would raise EU car and truck tariffs to 25% next week, up from the 15% net rate agreed in a deal struck last August. The EU “has not been treating us fairly on trade,” Trump wrote, indicating that automakers making cars in the United States would incur no tariff whatsoever from Europe. However, he said in a statement to reporters the increased tariff would encourage European manufacturers to relocate production to the US sooner.
The EU says it's following the Rules, But Implementation Has Been Slow
The European Commission quickly rebutted Trump’s assertion, insisting Brussels had not violated the terms of last summer’s deal and that it would take its time to weigh options in the event Washington were to. Under the deal, reached in August, the EU has accepted a US tariff rate of 15% and has introduced negotiations to suspend EU duties on US industrial products such as cars, accepting US safety and emissions standards.
However, the legislation to translate the proposed tariff reductions has only been advanced by EU lawmakers in March and will not be finalised before June. Trump is not waiting.
Europe Is Infuriated, Call Grows For Pay Back
European politicians were quick to condemn the statements. Bernd Lange, chair of the European Parliament’s trade committee, slumped under Trump’s “unacceptable” behaviour and deemed the US a disloyal partner. Marcel Fratzscher, president of Germany’s DIW economic institute, went even a step further, urging the German government and European Commission to “finally demonstrate some backbone,” levy countermeasures, and hit American tech companies with taxes.
The VDA, Germany’s powerful automotive lobby group, urged both sides to swiftly reach a solution, noting that the higher tariff would immediately significantly increase costs.
What It Means for Auto Manufacturers, and the Larger Trade War
Automakers were hit immediately. Ford shares fell 2.4%, Stellantis lost 3.3% and General Motors was down 1.5% following the announcement. Caught in the crossfire are European manufacturers with a US presence, such as Mercedes, currently investing $4 billion in its Alabama plant. Earlier this year, Mercedes warned that tariffs had already more than halved its group operating profit to 5.8 billion euros ($6.5 billion).
The tariff measure adds yet another layer of uncertainty to a sector already contending with rising prices and geopolitical upheaval.
FAQs
- What tariff rate do cars pay when imported from the EU to the US?
25% from next week, on top of the current agreed level of 15% under last month’s August trade agreement.
- Why is Trump implementing tariffs?
Eight months on, he says, the EU has not completed its part of the August trade agreement. The EU claims it’s on schedule, but this legislation won’t be finalised before June.
- Will the EU retaliate?
The EU has not announced any retaliation yet but has indicated it is exploring all options. There are lots of politicians and economists throughout Europe who are clamouring for retaliatory tariffs, or for taxing US tech here.
- How did markets react?
On the New York Stock Exchange, Ford slipped 2.4%, Chrysler owner Stellantis dropped 3.3% and General Motors fell 1.5% following the announcement
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