The fragile truce between the United States and the European Union on trade appears to have collapsed. Over the past weekend, Donald Trump announced a sharp increase in tariffs on cars and commercial vehicles imported from the EU, bringing the rate up to 25%. Those who believed the transatlantic tariff dispute had been settled were mistaken: according to the U.S. president, the European Union has failed to uphold the terms of a trade deal the two sides had previously agreed upon.
“We had a trade agreement with the European Union. They weren’t honoring it,” Trump told reporters. “So I increased the tariffs on cars and trucks to 25%, which means billions of dollars coming into the United States — and it forces them to significantly accelerate production in their factories.”
Trump made clear he sees the tariff hike not just as a punitive measure, but as a lever to reshape manufacturing geography. In his view, the move will pressure European automakers to shift more of their production to American soil — and to do so faster than they might have otherwise planned.
Brussels Pushes Back: “Unacceptable”
The European Commission wasted no time firing back, flatly rejecting Trump’s assertion that the EU had been in breach of any agreement. In a pointed response, Brussels stated it would keep all options on the table to defend EU interests should Washington violate the terms of the deal.
The political backlash within Europe was swift. Bernd Lange, President of the European Parliament’s International Trade Committee, did not mince words:
Germany Counts the Cost
While the diplomatic sparring plays out in press conferences and parliamentary chambers, economists in Germany are already running the numbers — and they are sobering.
According to the Kiel Institute for the World Economy, the new 25% tariffs could cost Germany alone nearly €15 billion in industrial output. In the long run, the losses could climb to roughly €30 billion, according to the Institute’s analysis. Moritz Schularick, the Institute’s president, described the potential consequences as “substantial,” underscoring just how exposed the German automotive sector is to shifts in U.S. trade policy.
Germany is not alone in facing significant exposure. Other EU member states identified as particularly vulnerable include Italy, Slovakia, and Sweden — countries where the automotive industry plays a central role in the broader economy.
