U.S. President Donald Trump’s decision to impose a 25% tariff on all cars produced outside the United States is expected to have a significant impact on the German automotive industry, already facing a crisis.
In 2024, Germany exported 450,000 cars to the U.S.—more than to any other country.
“Due to the new tariffs, car prices in Europe may fall because there will be an excess of cars on the market,” predicts economist Friedrich Heinemann from the ZEW Institute in Mannheim.
However, this potential price drop is not necessarily good news for automakers. They may face lower profit margins or be forced to cut production, which could lead to job losses and slower economic growth.
“Cars are Germany’s main export product. The new tariffs are a significant burden on the economy. If the trade war escalates, the damage will be even greater,” says Clemens Fuest, president of the Ifo Institute.
In response, Heinemann suggests the EU should be cautious: “It’s better to strike targeted blows than to unleash a large-scale escalation.”
Analyst Matthias Schmidt advises automakers to strengthen their U.S. presence to reduce their reliance on Trump’s unpredictable trade policies, pointing to Volkswagen’s efforts to build a new factory for its Scout brand in the U.S.
