Why Europe’s car industry is at the centre of a new US trade war | Trade War News
Trump Announces Increased Tariffs on EU Vehicles Amid Trade Tensions
Last week, President Donald Trump announced plans to increase tariffs on cars and trucks imported from the European Union (EU) from 15% to 25%. The move follows his accusations that the EU has delayed compliance with the terms of a trade agreement reached last July.
This escalation in trade policy coincides with deteriorating transatlantic relations, particularly stemming from the EU’s decision not to align with U.S. actions regarding Iran.
“I am pleased to announce that, based on the fact the European Union is not complying with our full agreed Trade Deal, next week I will be increasing tariffs charged to the European Union for cars and trucks coming into the United States,” Trump stated, although he did not present evidence to support his claim. He also clarified that vehicles produced in the United States by EU companies would be exempt from the increased levy.
As of now, no new tariffs have been enacted, but the proposal has caught Brussels off guard. The European Commission has refuted Trump’s statements, asserting that the EU is adhering to the agreed terms.
Understanding the Trade Deal
The trade agreement finalized in July 2025 aimed to lower U.S. tariffs on most EU goods, including vehicles, to 15%. In turn, the EU committed to investing heavily in U.S. military equipment and energy products, marking a notable shift in transatlantic economic relations.
Trump hailed the agreement at the time as unprecedented, noting that the EU would open its markets for U.S. exports with no tariffs. Nonetheless, tariffs on steel and aluminum remained in place, along with existing aerospace tariffs.
Despite the trade deal, the U.S. has reported significant trade imbalances. In 2024, the U.S. faced a $236 billion goods deficit with the EU, and even with tariffs in place, the EU maintained a surplus.
Tariff Implications and Legal Considerations
Experts in international trade indicate that raising tariffs on vehicles would have substantial consequences. Prior to the 2025 agreement, tariffs had been as high as 27.5%. Legal experts suggest that while such tariffs can be justified under U.S. national security concerns, recent court rulings may challenge their legality.
Camille Reverdy from the Bruegel think tank noted that the EU could respond by contesting these measures in the World Trade Organization (WTO), arguing that they violate existing trade agreements.
EU’s Automotive Trade Landscape
The automotive trade between the EU and the U.S. is substantial, with U.S. sales of EU vehicles being a notable portion. In 2025, German automakers like BMW, Volkswagen, and Mercedes-Benz were among the top exporters to the U.S. market.
Comments from EU lawmakers, including German MEP Bernd Lange, indicate that Trump’s threat seems specifically targeted toward Germany, exacerbating existing tensions over trade practices.
EU’s Response Strategy
In response to the tariff announcement, European Commission spokesperson Thomas Regnier indicated that the EU remains calm and focused on enforcing the initial agreement. European Trade Commissioner Maros Sefcovic is set to meet with his U.S. counterpart to discuss the situation further.
The EU has various strategies available for retaliation, including imposing tariffs on U.S. goods or pursuing legal measures at the WTO. Should tensions escalate, the EU may also seek to bolster its automotive industry through industrial policies and market diversification efforts.
Negotiations between the European Parliament and the European Council are ongoing, with officials aiming to streamline the trade deal’s implementation amidst rising concerns over potential tariffs.
