Posted originally on CTH on March 27, 2025 | Sundance

The atomic sledgehammer that President Trump just delivered to the German auto industry simply cannot be overemphasized.  A 25% tariff on imported cars and car parts completely negates hundreds of billions in pre-positioned investment dollars by German auto companies in Mexico.  [Executive Order Here]

[Cliff Notes Here]

To give scale to the impact on Germany, consider that German automakers currently have 330 automotive suppliers in Mexico according to information from VDA.  Audi (a subsidiary of Volkswagen) has no U.S. production sites; every Audi sold in America will be subject to a 25% tariff. The Audi brand access to the U.S. market was/is 100% dependent on Mexico, including for manufacturing the Q5 SUV, its top-selling U.S. model.

According to prior reporting from Politico, “Volkswagen’s most popular model for American consumers is the Tiguan, an SUV that is entirely manufactured in Mexico. The German automaker sold over 30,000 of the vehicles in the final quarter of last year, a nearly 50 percent year-over-year increase.”  But wait, it gets worse….

French-Italian-American automaker Stellantis is the most exposed of Europe’s automakers as it makes Jeep and RAM models in Mexico.

The tariffs will make European automakers’ Mexican factories completely redundant. They could make them in Germany for the same tariff impact. Making them in Mexico is now useless.  They were only being made/assembled in Mexico to gain access to the U.S. market without tariffs.

This reality will push all EU automakers to shift production to the U.S. There could also be an explosion in UAW membership depending on where in the USA the EU car companies end up manufacturing.

The auto industry is only one industry, but it is a huge economic driver for multiple countries, especially those countries who depend on access to the U.S. market in order to sell their cars and trucks.

German automakers will need three things, quickly: (1) Subsidies from German govt to help offset the impact of tariffs [Short term 2-5 years]. (2) Shift production of autos for U.S market into USA [Make in USA].  (3) Interim access to new markets to help offset the anticipated drop in demand [think Russia without sanctions].  Each of these facets plays into current geopolitics.

That’s mainly just the German impact.  Then overlay Canada and Mexico (big impact), along with South Korea and Japan (lesser impact due to pre-positioned manufacturing/assembly in the USA).  The auto-tariffs carry a huge economic outcome around the globe.

[Source]

Europe – “European Commission President Ursula von der Leyen responded quickly to a decision by United States President Donald Trump to slap a 25 percent tariff on auto imports.

The tariffs, which Trump said will take effect April 3, are a heavy blow for the European car industry and represent the largest escalation yet in Trump’s multi-fronted trade war, which is expected to have severe global economic consequences.

“I deeply regret the US decision to impose tariffs on European automotive exports,” von der Leyen said in a statement released late Wednesday evening. “Tariffs are taxes — bad for businesses [and] worse for consumers equally in the US and the European Union.”

She said Europe would assess the tariffs, and anticipated that further measures would arrive from the White House in the coming days. Trump has stepped back from implementing tariffs on America’s allies and adversaries several times since his Jan. 20 inauguration.

“We’re signing today,” Trump said of the protectionist tariffs. “It goes into effect April 2. We start collecting on April 3.”

While von der Leyen’s language was guarded, she left little doubt that the EU is prepared to retaliate.

“The EU will continue to seek negotiated solutions, while safeguarding its economic interests,” she said. “As a major trading power and a strong community of 27 Member States, we will jointly protect our workers, businesses and consumers across our European Union.” (More)