EU-US trade deal eases tensions but rattles German auto giants

July 29, 2025(MLN): The EU’s auto industry views the recent trade agreement with the United States as a sign of reduced tensions, though significant hurdles remain for automakers particularly in Germany.

Shares of German auto giants Porsche, Volkswagen, BMW, and Mercedes-Benz fell over 3% on Monday amid market concerns over the implications of the trade deal, according to APP.

The European Automobile Manufacturers’ Association (ACEA) welcomed the agreement "In principle," noting it eases “The intense uncertainty surrounding transatlantic trade relations in recent months.”

However, it warned that the continuation of 15% US tariffs on EU goods, including cars, would “continue to have a negative impact not just for industry in the EU but also in the US.”

German Chancellor Friedrich Merz said the US tariffs would cause “substantial damage” to Germany’s economy, the largest in Europe, though he acknowledged, “We couldn't expect to achieve any more.”

The US remains a vital market for European automakers, with nearly 750,000 cars exported there last year, accounting for almost a quarter of the sector's global exports.

Although the 15% tariff is lower than the 27.5% rate imposed by US President Donald Trump in April, it still stands significantly above the 2.5% tariff in place before his return to the White House.

German analyst Stefan Bratzel estimated that US consumers would bear about two-thirds of the price increase caused by the tariff, with car exporters absorbing the remaining third.

He added that companies may need to explore cost-cutting measures elsewhere.

The 15% tariff rate mirrors a similar arrangement in a trade deal the US recently struck with Japan, another major car-exporting nation.

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