U.S. tariffs threaten to deepen the crisis for German automakers
Not only China but also the United States is considering increasing tariffs on cars imported from Europe. This presents another serious threat to Europe's weakened automotive sector.
The German automotive industry is on the brink of a crisis due to insufficient demand for electric vehicles. Volkswagen's weakening position in China's crucial market exacerbates the situation, and the future outlook is not promising, particularly amidst the trade war between the EU and China. Unfortunately, much indicates that this is not the end of the problems for German brands, which expect another blow—this time from the USA.
Although there are still a few months until Donald Trump's presidency starts, analysts and experts are already predicting the potential impact of his decisions on the global economy. If the proposals made during the campaign are realized, European brands will stand to lose significantly.
This is primarily due to the potential increase in tariff rates on vehicles imported from Europe to the USA. The Trump administration may raise tariffs from 2.5% to 12.5%. According to analysts at Stifel Europe Bank, German manufacturers could see a profit reduction of up to 15%.
As reported by the German daily Handelsblatt, German brands export nearly 600,000 cars annually from European factories and 350,000 cars from Mexican factories to the USA. For products from Mexico, tariffs may be even higher.
It is worth mentioning, however, that not all German manufacturers are equally threatened. BMW is in a favourable position, as it has many factories in the USA. The same goes for Mercedes and Volkswagen. However, this does not change the fact that many models of these brands are still imported.
Higher tariffs may impact Porsche the most since all their cars sold in the USA are imported from Europe. Audi will also find itself in an unfavourable position, as the Q5 model—a sales hit in the USA—is produced in Mexico.
As "Handelsblatt" notes, the threat from the USA has come at the worst possible time. For years, the United States and China have been the largest export markets for German brands, and now, as sales in China decline, the last thing manufacturers from our Western neighbour need is trouble in the USA.
