Porsche, Mercedes face $3.7 billion hit from Trump tariffs

President Donald Trump commenced his “Road to Liberation Day” plans by imposing a 25% tariff on imported cars and auto parts, which could significantly impact major European automakers Porsche AG and Mercedes-Benz Group AG. The car manufacturers are expected to bear the brunt of the decision, facing an estimated €3.4 billion ($3.7 billion) in potential costs.

The new tariffs, announced by the White House on Wednesday, will take effect on April 2 for vehicles, with charges on imported parts following in May or later. 

Trump claimed the levies are meant to “take back what was taken from America” and will generate “tremendous growth” in the US auto industry by encouraging domestic investment and job creation.

German automakers see losses ahead of April 2

America is one of Germany’s car industry’s biggest exporters. The European nation ships more vehicles to the US than any other country, with high-end models such as the Porsche 911 sports car and the Mercedes S-Class sedan. If the tariffs go through, the two car models will certainly fall under the most affected.

Porsche and Mercedes shares fell as much as 5% in Frankfurt Thursday noon-session trading. BMW AG saw a 4.2% drop, while Volkswagen AG, the parent company of Audi and Lamborghini, declined by 2.2%. 

Aston Martin Lagonda Global Holdings Plc, which exports luxury cars to the US, suffered the steepest fall, plunging 8.9% in London earlier in the day.

Germany’s VDA automotive lobby group was unhappy with the US announcement, calling it “a fatal sign for free and rules-based trade.” The group is asking the European Union to negotiate with Washington and find a common ground before the clock ticks April.

Porsche appears to be the most vulnerable to the tariffs among all German-based car manufacturers. While it is struggling with declining sales in China, more customers making Porsche purchases have come from the US over the past 15 years. 

The American market recently overtook China as Porsche’s largest, but the company lacks domestic manufacturing facilities in the US, leaving its dealers entirely dependent on imports.

Since the stock peaked in May 2023 following its high-profile IPO, the company is now valued at approximately €44 billion, less than half of what it was then. 

Porsche’s electric vehicle deliveries in China fell by 28% last year, but American consumer sales only went down one year since 2009, which occurred in 2020, due to the COVID-19 pandemic.

More European automobile startups prepare for tariff fallout

German auto parts suppliers such as Robert Bosch GmbH and Continental AG are also expected to take a hit from the tariffs. Most German automakers operate US factories to serve local customers and export vehicles globally, but these new tariffs threaten to disrupt supply chains and increase costs.

The European Union is considering a response, but industry policymakers worry that a full-blown trade conflict could inflict lasting damage on an auto sector already grappling with rising costs and weaker demand.

“The tariffs place a heavy burden on companies and the industry’s tightly interwoven global supply chains,” said VDA President Hildegard Müller. She believes the trade levies have “negative consequences for consumers,” especially in North America.

The UK is also scrambling to secure an exemption from Trump’s tariffs to protect its auto industry. Chancellor Rachel Reeves confirmed that the British government is in “intense talks” with American officials to prevent the levies from being imposed on UK-made vehicles.

Approximately £6.4 billion worth of cars were imported from the nation to the US in 2023, making up nearly 20% of its total vehicle exports. Jaguar Land Rover, which sold 116,294 vehicles in the US last year, is among the most exposed manufacturers.

“A million British people work for American firms. A million Americans work for British firms,” Reeves said in an interview on Times Radio. “Our two economies are so closely intertwined. I believe, and we make this case to the United States, that free trade and fair trade are good for both of our countries.”

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