POLITICO — 2025-08-01
Automotive Industry
German automakers had hoped that months of lobbying pressure would give them extra carveouts in the EU-U.S. trade deal, but they're now reversing course as the dust settles on the agreement.
The industry had pushed hard for an export offset scheme in which American import tariffs would be offset against models produced in the U.S. and exported abroad. Another idea recently floated by Volkswagen was for tariff reductions based on their U.S. investments.
But those hopes are wilting.
“For all intents and purposes, the global deal for now is it,” Mercedes-Benz CEO Ola Källenius said on a call with investors this week, adding it was “very uncertain” whether sector- or company-specific amendments could be added.
The trade deal, which is still being finalized, lowers U.S. car and auto part tariffs from 25 percent to the baseline 15 percent starting Aug. 1.
Not everyone is giving up so easily, though. BMW CEO Oliver Zipse is one of the main proponents of the export offset scheme given the German automaker’s extensive factories in South Carolina. He is holding out hope for talks between the U.S. and Germany — although only the European Commission is supposed to negotiate trade deals for the bloc.
“It doesn’t have to be part of a major package. You can also do it directly between two countries,” he said in a call with media on Thursday, adding in a separate call with investors that the company will continue to push for the offset scheme.
Counting the damage
Over the past two weeks, all of Europe’s automakers have reported their half-year earnings — offering a first glimpse of the impact of the tariff war Donald Trump unleashed in April.
None are unscathed.
Porsche, which exports all of the cars it sells in the U.S. from the EU, said the tariffs have cost it €400 million so far, with its return on sales for the first half of the year falling to 5.5 percent from the previous 15.7 percent.
French-Italian-American automaker Stellantis has so far lost $300 million to the tariffs and told investors it expects the taxes will cost the company $1.5 billion over the full year.
The losses will continue, the automakers warned, as they continue to eat the 15 percent tariff and face a higher 25 percent tariff on their vehicles and parts manufactured in Mexico and Canada.
The lower auto tariffs granted to the EU, and to Japan in a separate deal, have angered the American auto lobby, which argues domestic companies now pay more than their foreign competitors thanks to the higher North American tariff rates.
Europe’s automakers are also hoping that the 25 percent tariff still in place on Mexico will be tweaked. However, Trump shows no signs of wanting to do that. On Thursday evening, he announced a 90-day extension of the 25 percent tariffs.
Also to be ironed out in the final agreement is a collaboration between the EU and the U.S. on car standards, aimed at making it easier for American carmakers to sell in Europe.
A senior Commission official said the deal includes “a commitment to work together … to see where standards are already aligned or where we need to work more closely to align them in the future.”
BMW’s Zipse alluded to pushing for more equal standardization between the two, telling the press that “we would like to appeal to both sides to continue to work on opening the markets and also on working on the convergence of technology rules.”
Worker displacement
As part of the agreement, the EU agreed to eliminate its 10 percent levy on cars imported from the U.S.
While that’s good news for car companies exporting into the EU, Ferdinand Dudenhöffer, the director of Germany’s Center Automotive Research, warned that workers will pay the cost. He estimates as many as 70,000 jobs could be lost among automakers and their suppliers as the companies shift production to the U.S. to skirt the tariffs.
Germany’s unions are also starting to express concerns, with IG Metall telling POLITICO that it wants local content requirements to “ensure that value creation takes place in Germany and Europe.”
Other member countries like France have similarly called for local content rules.
The tariffs and subsequent concerns around job displacement spurred the German Trade Union Confederation to call for an automotive summit with German Chancellor Friedrich Merz.
The EU is also looking to help a sector that is being battered by the transition to zero-emissions cars, rising Chinese competition, and now the Trump tariffs.
A separate strategic dialogue led by Commission President Ursula von der Leyen took place in January with a second session slated for September, during which the CEOs of Europe’s biggest automakers and suppliers will make their case for what would help the sector remain competitive.