Germany’s automotive association (VDA) has raised concerns over U.S. President Donald Trump’s proposed tariff plans, warning that the imposition of higher import duties could lead to increased car prices for U.S. consumers and negatively affect global automakers. The warning comes as the prospect of tariffs has caused a dip in auto stocks, with automakers bracing for potential impacts.
At a press conference on Tuesday, Hildegard Mueller, president of the VDA, expressed that Trump’s tariffs would likely drive up U.S. inflation. “Donald Trump promised in his election campaign to reduce inflation,” she said, adding that she hoped further discussions on this issue would take place. Trump, who took office on Monday, has yet to implement the wide-ranging tariffs he proposed during his campaign but has indicated that tariffs of 25% on vehicles from Canada and Mexico could be imposed as early as February 1.
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The proposed tariffs are part of Trump’s broader strategy to encourage automakers to shift more production to the U.S. While global automakers have significant operations in Mexico, the country is also a vital part of the supply chain for U.S. car production. Major suppliers such as Bosch and Continental have been seeking ways to mitigate the impact of potential U.S. tariffs by moving some production. However, analysts warn that such tariffs would hurt automakers and suppliers from Europe, Japan, South Korea, and the U.S. alike.
The news of the tariff threat sent shares of Asian automakers like Honda, Mazda, Hyundai, and Kia lower, as these companies produce many vehicles in Mexico. In Europe, automakers such as Volkswagen and Stellantis, which would be particularly vulnerable to tariffs on Mexican-made vehicles, saw stock declines of 0.8% and 1.3%, respectively.
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Volkswagen, the world’s second-largest automaker, expressed concern about the potential negative economic effects of the tariffs, stating that they could harm American consumers and the broader international automotive industry. The company, which plans to invest more than $10 billion in the U.S., has made significant commitments to its U.S. operations, including investments in its Chattanooga plant and a joint venture with Rivian. Volkswagen executives have been in ongoing discussions with the Trump administration about the proposed tariffs.
In anticipation of the new administration’s stance on tariffs, executives from global automakers have been engaging with Trump’s team. Stellantis Chairman John Elkann has spent several days in Washington meeting with top officials, while Volkswagen has also maintained close contact with the administration. Mueller, of the VDA, emphasized that the significant U.S. investments made by European automakers, such as plants in Republican states, should be taken into consideration in tariff discussions. “We have a lot to offer, many jobs in the USA, a functioning production network that also creates growth and prosperity in the USA,” she noted.
Source: Reuters
