The already struggling German motor industry has been dealt another blow, after US President Donald Trump signed an executive order to place a 25-percent tariff on car imports. The US market accounts for 13 percent of all German vehicle exports. 

German automotive industry reeling after Trump announces car tariffs

On Wednesday, March 27, Trump announced that a 25-percent import levy on foreign-made cars would take effect on April 3. The US president also hinted that he might impose tariffs on other products like medicines. He said the import tariffs on foreign goods would generate an additional 100 billion US dollars in revenue for the US government. 

The announcement sent shockwaves through the German car industry, which counts the US - together with China - as its largest export market. In 2024, the US imported nearly 25 billion dollars’ worth of cars from Germany, according to figures from the US Department of Commerce. German carmakers such as Volkswagen, Mercedes, BMW and Porsche are some of the biggest brands in the US import market. 

German car manufacturers expect falling profits as a result of tariffs

Trump’s tariffs could see projected operating profits for manufacturers like Porsche and Mercedes fall by as much as a quarter in 2026, Bloomberg reports. According to Hildegard Müller, president of the German Association of the Automotive Industry (VDA), 86 percent of German car companies expect negative economic consequences from the tariffs. 

To offset these losses, carmakers may be forced to raise prices or shift more production to the US. Many German automotive companies already have a presence in the US, employing approximately 138.000 people and in 2024 producing over 844.000 vehicles, according to the VDA. 

"The announced additional US tariffs of 25 percent on all passenger cars and light commercial vehicles not manufactured in the US send a disastrous signal for free, rules-based trade,” Müller said in a press release, adding that the tariffs “place a significant burden on both companies and the automotive industry's closely interwoven global supply chains - with negative consequences especially for consumers, also including those in North America.” 

The German automotive industry is calling on the EU to set up negotiations with the US to work out a bilateral agreement. During Trump’s first term in office, the EU and US were able to come to an agreement that avoided a trade conflict.