Tariffs on cars and trucks imported from the EU will increase to 25% next week.
On Friday, President Donald Trump announced his administration would carry out higher import levies on the European Union next week. In a social media post, he said: “Based on the fact that the European Union is not complying with our fully agreed to Trade Deal (capitalization his own), next week I will be increasing Tariffs charged to the European Union for Cars and Trucks coming into the United States.”
The U.S. Supreme Court ruled in February that Trump’s previous efforts to invoke “reciprocal tariffs” on countries around the world under the International Emergency Economic Powers Act (IEEPA), were illegal. Following that outcome, he signed an executive order placing a 10% blanket “global tariff” on all imports under Section 122 of the Trade Act of 1974. In today’s post, Trump did not mention under what authority these higher tariffs would take effect, and the 10% tariff is restricted to a 150-day time limit itself.
European automakers including BMW, Mercedes-Benz and Volkswagen Group import some models to the American market, but also have large presences within the U.S. as well. Others, like Ineos Grenadier, import all their vehicles from France, where this could have an even more profound effect on automakers’ pricing and sales volume.
For the moment, it is unclear if or how businesses and governments within the EU will respond. However, after the 10% worldwide tariff went into effect, the 27-member bloc warned a trade deal with the U.S. could be in jeopardy due to the Trump administration’s erratic tariff policy, and postponed a vote for that agreement to go into full effect.
In his statements on the matter, including today’s announcement, Trump insists that automakers whose cars are produced within the U.S. will face “NO TARIFF”. “Many Automobile and Truck Plants are currently under construction, with over 100 Billion Dollars being invested, A RECORD in the History of Car and Truck Manufacturing.”
As a consequence, this could also lead to a marked price difference between domestically assembled and imported models. Or, as an alternative, we could see companies increase prices on U.S.-built cars to offset those imported from abroad. For the moment, though, we will have to keep an eye on how pricing for import-heavy automakers will shift as a consequence of these increased tariffs, when they go into effect.
