Auto tariff shock: Why Europe faces the biggest hit from Trump’s trade move

Donald Trump's auto tariffs will impact the EU market

The EU-US relationship dynamics in the second regime of President Donald Trump is set for a big change with the announcement of 25 per cent tariff on cars and car parts imported into the United States.

His move would hit the car companies across the European Union the hardest. Currently the vehicles shipped from Europe to the US face a 2.5 percent tariff. Meanwhile, cars built in America face a 10 per cent tariff when they're shipped to the European Union.

The tariffs, set to begin on April 3, will affect both completed vehicles imported into the US and parts brought in for use in American manufacturing plants.

While the goal is to strengthen U.S. auto production, this measure is anticipated to drive up prices throughout the automotive market.

European Union officials have announced plans to reinstate tariffs introduced during President Trump’s first term and impose new tariffs on a range of American goods, including lingerie and soy products, by mid-April.

These measures were a response to U.S. steel and aluminum tariffs, with the first round—targeting American whiskey and motorcycles—delayed for further negotiations and to avoid a harsh U.S. backlash that could harm European wine and Champagne exports.

The United States is the European Union's top car export market, representing nearly 25 per cent of all EU vehicle exports. In 2024, European automakers exported cars worth 38.4 billion euros to the U.S., a 4.6 per cent decrease from the previous year, according to the ACEA.

Europe is home to the some of the major car exporter companies. Germany is the world’s biggest automotive industries, and it plays a crucial role in the country’s economy. They are sending US consumers cars from companies like Volkswagen, Mercedes-Benz and BMW.

The three largest German automakers account for around 73 per cent of the EU's car exports to the U.S., with the U.S. being the top export market for Germany's auto industry.

Nearly one in three Porsches and one in six BMWs are exported there. While Mercedes, Volkswagen, and Audi have U.S. and Mexican production sites, they would still be significantly impacted by tariff hikes.

European leaders, who have long criticized the imbalance in U.S.-EU auto tariffs, may push for retaliation or renegotiate terms with the Trump administration.

Responding to Trump's tariff policy European Commission President Ursula von der Leyen said the tariffs would be “bad for businesses” and “worse for consumers”.

While Trump has also imposed a 20 per cent import tax on all Chinese goods over fentanyl production, along with 25 per cent tariffs on Mexico and Canada, and a 10 per cent tax on Canadian energy products.