Transatlantic Tensions: Europe's Car Industry at Risk Amid U.S. Tariff Threat

Germany's economy minister and the autos association criticize Donald Trump's 25% tariff on imported vehicles, warning of negative impacts on European and U.S. economies. Volkswagen shares drop, and the German automotive industry calls for negotiations to prevent a trade war. The IfW institute predicts limited export losses for Germany.

Germany's economy minister, alongside its automotive association, has denounced the 25% tariff on imported vehicles recently announced by former U.S. President Donald Trump. The officials warned that such measures could negatively impact both European and American economies, emphasizing the need for urgent negotiations to avert an escalating trade dispute.

Volkswagen shares, heavily affected due to its significant supply chain in Mexico and absence of U.S. production facilities for its Audi and Porsche brands, saw a 5.1% drop in pre-market trading. Other automotive stocks, including Mercedes-Benz, BMW, and Daimler Truck, also faced declines of approximately 3.5%, with autos supplier Continental down by 2.9%.

Economic Minister Robert Habeck stressed the necessity for the EU to respond decisively, highlighting that it must not capitulate in the face of U.S. actions. The German VDA car lobby labeled the tariffs a severe threat to free trade, potentially disrupting companies and global supply chains. Despite these concerns, research from the IfW economic institute suggested Germany might not be the hardest hit, forecasting a 0.18% reduction in GDP, significantly less than impacts expected in Mexico and Canada.

(With inputs from agencies.)