President Donald Trump’s threat to raise tariffs on European Union cars and trucks to 25% has put new pressure on the world’s largest trade relationship.
Trump said the EU was not complying with its trade deal with Washington. He did not explain the objections in detail. But the message was clear: the U.S. is ready to use tariffs again as leverage over Europe.
The threat targets autos. The signal is much wider.
A delayed deal becomes a tariff risk
The Turnberry Agreement had set a 15% tariff ceiling on most EU exports to the U.S. It gave European automakers some relief after earlier duties and was meant to stabilize transatlantic trade.
But the agreement has not moved cleanly through the EU’s legislative process. Reuters reported that the EU agreed to remove duties on U.S. industrial goods, including autos, and accept U.S. safety and emissions standards on vehicles. EU lawmakers advanced the legislation in March, but final approval is not expected before June.
That delay has now become a political and economic risk.
Automakers face the first hit
A 25% tariff would raise the cost of selling EU-made vehicles in the U.S. It would also push European manufacturers to place more production inside America. Trump said vehicles built in the U.S. would not face the tariff.
That matters for European carmakers with major exposure to the American market. Germany would feel the pressure quickly because road vehicles remain one of the EU’s most important export categories to the United States.
The EU had expected the trade deal to save European automakers about €500 million to €600 million a month. A higher tariff would weaken that benefit and add uncertainty around pricing, margins, investment and supply chains.
The timing makes it more serious
This is not happening in a calm global economy. Energy prices have already risen because of the Iran war and pressure on the Strait of Hormuz. A new tariff shock would add another layer of cost pressure at a time when inflation remains politically sensitive.
For markets, the risk is simple. Higher tariffs can squeeze automaker margins, lift import costs and complicate inflation expectations. They also make corporate planning harder on both sides of the Atlantic.
This is bigger than cars
The EU-U.S. trade relationship is too large to treat this as a narrow auto dispute. Trade in goods and services between the two sides reached about €1.68 trillion in 2024. Together, the U.S. and EU account for almost 30% of global trade in goods and services and 43% of global GDP.
That is why the tariff threat matters. It does not only affect carmakers. It tests whether Washington and Brussels can keep a major trade framework stable at a fragile moment for the global economy.
The key question now is whether Brussels moves faster to complete the deal or prepares a response. For now, a trade agreement designed to reduce uncertainty has become another source of it.