President Donald Trump announced on Friday that he will increase tariffs on cars and trucks imported from the European Union to 25%, citing non-compliance with a trade deal agreed upon last year. The current tariff rate is 10% under a deal negotiated in July, which was seen as a reprieve for the EU from higher tariffs Trump had previously threatened.
Key Takeaways
President Donald Trump announced he will increase tariffs on EU-imported cars to 25%, citing non-compliance with a previous trade deal. This move escalates tensions between Washington and Brussels, particularly affecting automakers like Mercedes, BMW, and Volkswagen.
- President Trump raises EU car import tariff from 10% to 25%
- European Union delays ratification of the Turnberry Deal due to uncertainty over US tariffs
- Automobile manufacturers such as Mercedes-Benz, BMW, and Volkswagen are expected to be heavily impacted by the new tariffs
- The Supreme Court ruling earlier this year does not affect these specific car-related tariffs
The announcement comes amid stalled talks over how to move forward on last summer's deal, with disputes centering around steel and aluminum tariffs. European officials have pointed to political problems in Europe and disagreements over the future of Greenland as reasons for the delay in ratifying the deal.
Trump's decision marks a sharp escalation in trade tensions between Washington and Brussels. Cars are a vital industry for Europe, making them a particularly sensitive target for Trump. The president urged European carmakers to shift production to the US, stating that vehicles produced in U.S. plants would be exempt from the new tariffs.
The EU has been approached for a response, but no official statement has been released yet. The trade deal agreed upon at Trump's Turnberry golf course in Scotland set levies on most European goods at 10%. In exchange, Europe agreed to invest in the US and make changes expected to boost US exports.
The Supreme Court ruled earlier this year that a large part of Trump's tariff agenda was illegal. However, the tariffs affecting cars fall under a different legal process and are not impacted by the Supreme Court ruling. European automakers like Mercedes, BMW, and Volkswagen could be significantly impacted by the change in tariff rate.
The president of Germany's VDA auto association urged the U.S. and European Union to engage in swift talks and honor their existing trade agreement after President Donald Trump announced a tariff hike on cars from the EU on Friday. VDA President Hildegard Mueller said the cost of additional tariffs would be enormous and would likely impact consumers in the United States as well.
Carmakers, the largest industrial sector in Germany, are already grappling with weak demand in Europe, a shift to EVs, and fierce competition from China. The Trump administration last year imposed a 25% tariff on global automotive imports but struck a deal in Turnberry, Scotland, with the EU to lower those duties to a net 10%. In exchange, the EU agreed to eliminate duties on U.S. industrial goods, including autos, and accept U.S. safety and emissions standards on vehicles.
The European Commission issued a statement calling on the United States to honor the deal "with no increases in tariffs beyond the clear and all-inclusive ceiling previously agreed." A White House official told CNBC that the EU has "failed to make substantial progress on their agreed-upon commitments" under the trade deal, adding that it has "always been clear that the president reserves the right to adjust tariff rates."
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