A fresh tariff threat from the White House has European carmakers bracing for a multibillion-dollar hit, and U.S. shoppers may end up paying the bill at the dealership. The plan would jump duties on cars and trucks shipped from Europe from 15% to 25%, undoing a deal that was supposed to bring stability to a jittery transatlantic auto trade.
- Analysts estimate the hike could cost EU automakers €3.5 billion in 2026 and €5.7 billion in 2027.
- BMW, Mercedes-Benz, Porsche, Volkswagen, and Stellantis face steep earnings drops.
- At least half of the added cost is expected to land on American buyers.
What Trump Actually Said
President Donald Trump said he would raise tariffs charged to the European Union for cars and trucks to 25%, posting on Truth Social that the EU is “not complying with our fully agreed to Trade Deal” and that the new rate would take effect the following week. He didn’t spell out exactly how the EU had fallen short. He told reporters the higher tariff “forces them to move their factory production much faster” to the U.S.
The move blows up the so-called Turnberry Agreement reached last summer. Trump and European Commission President Ursula von der Leyen agreed to the trade deal last July, setting a 15% tariff on most goods. The EU had said it expected the bilateral deal would save European automakers about 500 to 600 million euros ($587m to $704m) per month. Brussels, for its part, says it’s still playing by the rules.
The Bill for European Brands
The financial math looks ugly for Germany’s biggest names. Analyst firm Bernstein calculated the move could cost EU carmakers an additional €3.5 billion ($4.1 billion) in profits this year, and another €5.7 billion ($6.6 billion) in 2027.
BMW Group’s earnings before interest and taxes could fall 12 percent in 2026 and 15 percent in 2027. Mercedes-Benz Group could see earnings drop 14 percent this year and 18 percent in 2027, while Porsche could take a 16 percent hit this year and a further 21 percent in 2027. Volkswagen Group could face a 9 percent headwind this year and an 11 percent hit next year, and Stellantis could be hit with a 21 percent drop in earnings in 2026 and a 19 percent hit in 2027.
Some of the pain is softened by U.S.-based production. BMW Manufacturing is still the largest U.S. automotive exporter by value for the 12th year running, with its Spartanburg, South Carolina, plant accounting for almost 200,000 vehicles, or $9 billion. Mercedes runs an SUV plant in Alabama, and Volkswagen builds in Tennessee. Porsche, Audi, and most Stellantis European-branded models, though, still come over on ships.
What U.S. Shoppers Should Expect
Carmakers rarely swallow tariffs whole. Bernstein says at least half of these costs could be passed on to buyers. For a $60,000 German sedan, that could mean several thousand dollars added to the window sticker. Higher-end models like the Porsche 911 or AMG-tuned Mercedes coupes could see even steeper jumps because their margins are richer and demand tends to be less price-sensitive.
Some automakers are already pulling back. Volvo Cars has announced a sizable reduction in its U.S. model lineup, citing the impact of steep tariffs imposed on vehicles imported from Europe and China. The Swedish automaker, owned by China’s Geely Holding, will now focus primarily on selling SUVs in the U.S., discontinuing sedans like the S60 and S90 due to profitability challenges.
Domestic shoppers feeling priced out of imported luxury crossovers may shift toward U.S.-built alternatives. A buyer cross-shopping a Mercedes GLE or BMW X5 might suddenly take a longer look at a Cadillac Lyriq, Jeep Grand Cherokee, or even a loaded Ford Bronco SUV, since none of those carry the European tariff burden.
A Trade Policy That Keeps Shifting
The whiplash is the bigger problem. The Supreme Court ruled in February that much of his tariff agenda was illegal, which pushed the administration to dig up other legal tools to keep duties flowing. Trump imposed 25% Section 232 tariffs on foreign autos in March 2025, but those tariffs were then lowered as part of the trade framework with the EU. Now the 25% figure is back on the table.
In 2025, U.S. auto tariffs added $30 billion in costs to the automotive industry, leading to a 10.4% increase in the average vehicle MSRP according to Kelley Blue Book. Imported vehicles bore the brunt of these tariffs, with price hikes ranging from $5,000 to $8,900 per vehicle. Another round at 25% would likely push average transaction prices up again right when affordability is already stretched.
Where the Smart Money Is Watching Next
The next few weeks will tell us whether this is a negotiating salvo or a hard policy turn. The EU has hinted it could retaliate, and European lawmakers have been adding safeguards like sunset clauses to the original framework. For American car buyers, the practical move is to keep an eye on incentives and inventory through the summer. If you’ve been eyeing a European model, the price tag you see today may not be the one you see by fall.
