Automakers around the world have been hit hard by US President Donald Trump’s decision to impose a 25% tariff on all car imports into the United States, with manufacturers warning of severe consequences for supply chains, pricing, and production.
The tariffs, due to take effect on 2 April, cover not only cars and light trucks but also foreign-made auto parts — a move that has shaken an industry already facing soft demand and heavy competition. Shares in major carmakers fell sharply in response, with Volkswagen, BMW, Mercedes-Benz and Stellantis each dropping between 2% and 6% on European exchanges. US and Asian manufacturers also suffered heavy losses, with General Motors down more than 8% in after-hours trading and Hyundai sliding 4.3% in Seoul.
Germany’s Economy Minister Robert Habeck called for a firm EU response, warning the tariffs were “bad news for German carmakers, for the German economy, for the EU, but also for the US.” Hildegard Müller, president of Germany’s automotive industry association VDA, said the duties would disrupt “closely interwoven global supply chains—with negative consequences, especially for consumers—including in North America.”
Industry analysts note that German brands are especially exposed. Volkswagen, Mercedes-Benz and BMW collectively exported hundreds of thousands of vehicles to the US last year. Many of their premium models are manufactured in Mexico or Europe, leaving them directly vulnerable to the new duties. Volkswagen alone produced nearly 350,000 cars at its Puebla plant in Mexico in 2023 — most destined for the US market.
BMW warned that a trade conflict “would not have any benefits,” pointing out that its Spartanburg, South Carolina plant — the company’s largest worldwide — exported over 225,000 vehicles last year, totalling more than $10bn in value. “Both sides should therefore promptly find a transatlantic deal that creates growth and prevents a spiral of isolation and trade barriers,” a spokesperson said.
Mercedes-Benz, which employs over 11,000 people in the US, said it was still assessing the impact of the tariffs. Volvo Cars, which also exports into the US from Europe and Asia, said it was “looking into the effects,” while Renault confirmed it was monitoring developments closely as it considers expanding its Alpine brand into the American market.
French car parts supplier Valeo said it would be forced to raise prices. The European Automobile Manufacturers’ Association (ACEA) expressed “deep concern,” urging the EU and US to find an immediate resolution to avoid a full-blown trade war.
The disruption has been felt beyond Europe. In Japan, Toyota, Honda and Nissan all recorded losses between 1.7% and 2.5%, while South Korea’s Hyundai and Kia fell sharply despite recent US investment announcements. India’s Tata Motors, which owns Jaguar Land Rover, dropped more than 5%, and the UK’s Aston Martin plunged to a record low on Thursday, losing nearly 7%.
Trump’s move also casts a shadow over North American operations. General Motors and Ford both rely heavily on supply chains that span Mexico and Canada. GM imported roughly 750,000 vehicles from its neighbours last year, while Ford exported nearly 200,000 cars to the US from Mexico in the first half of 2024 alone.
Suppliers warn that even US-based production will not be spared. Many American factories depend on imported components — from engines to electronics — which will also attract the new duties. UBS and JP Morgan both forecast major supply chain disruptions, while Wedbush analysts said the tariffs could raise vehicle prices by $5,000 to $10,000 per unit.
The timing is particularly difficult for UK and European manufacturers. British car exports to the US rose 38.5% last year, offsetting declines in other markets, and nearly eight in ten cars made in Britain are exported. The UK’s Society of Motor Manufacturers and Traders (SMMT) warned that the tariffs threaten a fragile recovery.
