U.S. to Raise Tariffs on EU Cars to 25%, Hitting Luxury Automakers Hardest

U.S. Trade Representative Jamieson Greer confirmed to CNBC on April 6, 2026, that the White House is moving to impose 25% tariffs on vehicles imported from the European Union, effectively reversing a bilateral deal reached in August 2025. Under that earlier agreement, the U.S. had lowered its global 25% tariff—imposed under Section 232 on national security grounds—to 15% for EU cars.

Rachel Ziemba, a senior fellow at the Center for a New American Security (CNAS), said President Donald Trump has the authority to make this move but that the stated justification remains unclear. She noted that the EU requires bloc-level implementation to execute the deal, which has caused delays.

Trump accused the EU of violating the agreement after a number of European countries refused to send troops to assist the U.S. Navy in opening the Strait of Hormuz. EU officials deny the claim. The tariff decision coincides with the White House announcement of a 5,000-troop withdrawal from Germany, following German Chancellor Friedrich Merz's criticism that Washington had been “humiliated” in negotiations with Iran.

The European Automobile Manufacturers’ Association (ACEA) reported that auto trade accounts for 8% of total EU-U.S. trade. The U.S. is the EU's largest export market for cars, representing 29% of the bloc's total export value. Analysts say German manufacturers BMW, Mercedes-Benz, and Volkswagen will suffer the most due to their large U.S. presence.

Georgetown University professor Gregory Shaffer said the tariffs will primarily affect high-end and luxury vehicle lines, because these are imported fully assembled from Europe. Midsize models, in contrast, are often produced in the U.S. under the USMCA (U.S.-Mexico-Canada Agreement) incentives.

Volkswagen operates a large plant in Chattanooga, Tennessee, producing the Atlas, Atlas Cross Sport, and ID.4 models, but the Golf is still made in Germany. Mercedes-Benz builds many SUVs in Alabama, though sedans like the S-Class remain German-made. BMW produces its X series in Spartanburg, South Carolina, but 3 Series and 4 Series cars come mainly from Germany.

Porsche and Audi, both part of Volkswagen, have no U.S. production. Ultra-luxury brands Ferrari and Lamborghini manufacture entirely in Italy, facing direct impact. According to an Automotive News report from March 2026, Porsche is considering expanding production to the U.S. to hedge against tariff risks.

Tax consultant Kyle Peacock noted that component makers—such as those producing clutches, exhaust parts, and engines—are also affected as cross-border material flows from U.S. plants to European factories slow. One of his clients, a clutch manufacturer for Stellantis and Volkswagen, has already seen a clear drop in sales.

The Tax Foundation, a non-profit, estimates that Trump's tariffs have added an average $1,000 in tax burden per U.S. household, expected to fall to $700 after a Supreme Court ruling. Peacock expects these costs to be passed directly to car buyers, especially wealthier customers of premium brands.

A Harris Poll survey from March 2026 found that 72% of Americans believe tariffs are negatively affecting their lives. A separate Pew Research Center poll from April 2026 showed that 63% of Americans do not trust President Trump's handling of tariff policy.

Professor Shaffer warned that the EU could retaliate by targeting exports from U.S. swing states. The White House did not respond to a request for comment from Al Jazeera. Automakers like Volkswagen said they are reviewing their options and awaiting further details.