Investing.com -- Barclays analysts warn that a 25% U.S. tariff on European car imports represents a “worst-case scenario” for the industry, particularly German automakers like BMW (ETR:BMWG), Mercedes-Benz (OTC:MBGAF), and Volkswagen (ETR:VOWG_p).
The proposed tariffs would raise costs, forcing automakers to either absorb the impact, pass it to consumers, or shift production to North America—moves that require time and capital.
Those with existing U.S. production, such as BMW’s Spartanburg plant and Mercedes-Benz’s Alabama facility, are better positioned, while manufacturers heavily reliant on European exports face greater financial strain.
Shares of European automakers slid following the tariff announcement. At 08:42 GMT, Aston Martin (LON:AML) tumbled 4.6%, Stellantis (NYSE:STLA) dropping 5.6%, Mercedes-Benz slipping 5.4%, BMW declining 4.4%, Volkswagen down 3.1%, Porsche down 5.3%, and Ferrari (NYSE:RACE) dipping 2.2%.
Wolfe Research calls the tariffs a "hawkish outcome," emphasizing their immediate impact on vehicles and components, with the administration expecting $100 billion in annual revenue.
While USMCA-compliant imports are initially exempt, the broader impact on supply chains is severe.
The brokeage warns that combined with potential EU retaliatory tariffs of 15-20%, total duties on European auto exports to the U.S. could reach 40-45%.
The move underscores the administration’s willingness to prioritize long-term industrial policy over short-term market stability.
Raymond James analysts flag broader economic and geopolitical consequences, predicting reciprocal tariffs from the EU, China, and Japan.
The higher costs may reduce consumer demand, disrupt supply chains, and raise vehicle prices.
The brokerage also notes that upcoming trade negotiations could seek to soften the blow, but uncertainty remains over whether targeted exemptions will emerge.
Capital Economics warns of inflationary pressures, with Chief North America Economist Paul Ashworth noting that U.S. vehicle imports totaled $217 billion in 2024, with 21% coming from the EU—half from Germany.
While the administration projects $100 billion in tariff revenue, the firm estimates a more realistic $50 billion. If stacked with reciprocal tariffs, the total burden could approach the administration’s projections, further straining trade relations. In the short term, consumers may delay purchases, increasing demand for used vehicles and auto repairs.
Automakers most exposed include BMW, Porsche, and Aston Martin, which rely heavily on U.S. exports.
The Porsche 911, produced exclusively in Germany, will face direct cost increases, while Aston Martin, with no U.S. production, is highly vulnerable. BMW, despite strong U.S. manufacturing, still imports several sedan models subject to the tariffs.
Mercedes-Benz, Stellantis, Volkswagen, and Ferrari also face risks. Mercedes-Benz produces SUVs in Alabama but imports luxury sedans.
Stellantis’ European brands, like Alfa Romeo and Fiat (BIT:STLAM), remain exposed, despite its strong U.S. presence with Jeep and Dodge.
Volkswagen, manufacturing some models in Chattanooga, still imports 80% of its U.S. lineup, including Audi vehicles.
Ferrari, which exclusively builds in Italy, will see its entire U.S. lineup affected but may offset costs given its ultra-luxury status.
With mounting pressure on policymakers, Barclays, Wolfe Research, Raymond James, and Capital Economics stress on the need for a balanced approach to protect domestic industries while preventing global economic instability.
The coming months will be crucial as automakers and governments assess their responses to this escalating trade conflict.