Germany auto association VDA says on US tariffs: A termination of the tariff deal could soon lead to higher tariffs for our companies

Germany auto association VDA says on US tariffs: A termination of the tariff deal could soon lead to higher tariffs for our companies

Germany’s VDA Warns of Escalating US Tariffs and Their Impact on the Automotive Sector

The German automotive industry faces mounting pressure as the Verband der Automobilindustrie (VDA) cautions that the termination of the current tariff agreement with the United States could trigger higher duties, exacerbating economic risks for both sides. With the U.S. government under President Donald Trump having already imposed additional tariffs—including a 25% Section 232 duty on imported vehicles and parts—the effective rate for EU cars has surged to 27.5%, while light trucks face 50% tariffs. A reciprocal 10% tariff on EU imports, set to take effect on April 5, 2025, further complicates trade dynamics.

The VDA emphasizes that the U.S. market is critical for German automakers, which produced over 900,000 vehicles in the U.S. in 2023, with half exported globally. German manufacturers accounted for 13.1% of EU car exports to the U.S. in 2024, including brands like BMW, Porsche, and Volkswagen, which derive significant sales from North America. However, the new tariffs threaten to raise vehicle prices by up to $6,400 per unit and erode operating profits, particularly for large OEMs.

The VDA argues that tariffs are an ineffective negotiation tool and risk sparking a trade conflict with inflationary consequences. It highlights inconsistencies in U.S. policy, such as the 25% duty on U.S.-popular pickups versus the EU’s 10% car import tariff, to underscore the lack of reciprocity. Additionally, the association warns that protectionist measures could disrupt supply chains, deter investment, and reduce local employment, as German suppliers employ 138,000 workers in the U.S..

While the EU has proposed a “zero-for-zero” tariff agreement to de-escalate tensions, the U.S. has rejected the offer. The VDA urges continued dialogue to address trade barriers and align regulatory standards, stressing that unilateral actions risk harming consumers and stifling growth on both sides of the Atlantic.

As the 90-day window for resolving the dispute nears, companies are advised to reassess supply chains and explore localized production to mitigate risks, though full disentanglement from global trade could undermine long-term synergies. The VDA’s warning underscores the fragility of transatlantic trade and the urgent need for a balanced resolution.