Automotive News Europe — 2025-07-28
Automotive Industry
German automakers and Sweden’s Volvo Cars welcomed a trade deal between the U.S. and European Union that reduces tariffs on cars they export to the United States to 15 percent from the current 27.5 percent.
Mercedes-Benz said the deal provides relief for the German auto industry. The automaker urged continued dialogue between the EU and the U.S. to further lower trade barriers, emphasizing the importance of cooperation for the sector’s growth.
Volkswagen Group said it is awaiting further details on the agreement soon. “We welcome the agreement between the EU and the U.S. in the tariff dispute and the planning security that comes with it for the European automotive industry,” VW said.
“We expect the details of the agreement to be finalized and communicated in the near future. As soon as we have the exact contents of the agreement, we will examine and evaluate them carefully,” VW added in a statement.
Volvo Cars said it welcomed the deal and the clarity it provides. The automaker said it will continue with its strategy to build its cars where it sells them as much as possible, including adding production of its XC60 at its U.S. factory northwest of Charleston, S.C.
BMW, Mercedes and other European automakers are getting a €4 billion ($4.7 billion) earnings lift from the deal, according to Bloomberg Intelligence.
BMW and Mercedes will also benefit from tariff exemptions for about 185,000 cars they export annually from their U.S. factories, BI analyst Michael Dean said in a note.
“It’s the best result out of what was looking like a bad situation,” auto analyst Matthias Schmidt said in comments on July 27. “I think German and Swedish CEOs will be sleeping more soundly tonight than they have in recent weeks.”
The U.S. market is critical to automakers because profit margins are higher than in Europe or China.
VW on July 25 cut its full-year outlook after the duties hit the Porsche and Audi brands that import all of the cars they sell in the U.S.
Stellantis announced a surprise first-half net loss after scrapping investments and tallying the impact of trade hurdles, while Volvo recorded an impairment partly driven by the impact of tariffs on the SUVs it sells in the U.S.
Deal will burden German companies, VDA says
Germany’s VDA auto association president, Hildegard Mueller, said the deal averts a further escalation of a trade dispute but will still be costly for the country’s automakers.
“It is clear that the U.S. tariff rate of 15 percent for automotive products will cost companies in the German automotive industry billions annually,” she said. It will also burden automakers with higher costs as they invest heavily in the shift to electrification.
The decisive factor will be how the agreement “will be structured in concrete terms and how reliable it is,” Mueller said in a statement.
The new 15 percent tariff is significantly higher than the 2.5 percent duty in place before President Donald Trump hiked tariffs on U.S. imports, and it forces companies to weigh whether to raise prices or move more production to the U.S.
Audi said on July 28 that it is still assessing the implications of the deal. Audi is among the automakers most exposed to U.S. tariffs as it has no manufacturing facilities in the U.S.
Audi could build vehicles at three locations in the U.S. in part by leveraging production capacities of parent Volkswagen Group, sources told Automotive News Europe sibling publication Automobilwoche in May. Audi has said it will make a decision on building up its U.S. presence this year.
“Should the 15 percent tariff stay in place long-term, it would still put Audi at a competitive disadvantage, because its key peers have a more pronounced U.S. production footprint,” said Fabio Hoelscher, an analyst from Warburg Research.
Dealers warn of higher prices in the U.S.
The ZDK German dealers association said the 15 percent tariff structurally increases the price of German vehicles in the U.S. market.
“This will have an impact on production decisions and the model strategy of the manufacturers,” ZDK President Thomas Peckruhn said in a statement. “What is now being sold as a diplomatic breakthrough ends up hitting customers — with less choice and higher prices.”
Peckruhn added: “If manufacturers withdraw from the U.S. market or adjust production volumes, this would have a direct impact on availability, delivery times and model diversity in Germany as well.”
Douglas A. Bolduc, Nathan Eddy, Bloomberg and Reuters contributed to this report.