^{Source: The Guardian}

The global auto industry is entering turbulent territory once again as sweeping new U.S. tariffs—led by President Donald Trump—begin to take effect, sparking market declines and escalating trade tensions with major economies.

New Tariffs Hit Hard Across Continents

Starting at 5:00 a.m. London time on April 9, the United States imposed aggressive new tariffs on vehicle imports from multiple countries. The new round of duties includes:

• 104% tariff on Chinese cars
• 20% tariff on imports from the European Union
• 24% on Japanese vehicles
• 49% levy on Cambodian auto imports

This move follows the U.S. decision just last week to implement a blanket 25% tariff on all foreign cars imported into the country. The White House has also announced plans to extend these levies to include certain auto parts by May 3, 2025.

These measures are being described by Trump’s administration as “reciprocal” trade actions, aiming to level what the President calls an “unfair playing field.”

China Responds with Its Own Tariff Bomb

In a swift retaliatory strike, China raised tariffs on American auto imports to 84%, effective April 10. This dramatic increase comes as China tries to shield its domestic auto industry while sending a strong message back to Washington.

According to the Chinese Ministry of Commerce, this decision will impact $6.3 billion worth of U.S. vehicle exports annually.

Stock Market Shake-Up: Automakers See Red

Markets responded immediately to the news. On Wednesday:

• Valeo SA, the French auto parts manufacturer, plunged 7.1%, making it one of the worst performers on the Stoxx 600 Index.
• Germany's Big Three—Volkswagen, Mercedes-Benz Group, and BMW—fell approximately 2% each, with BMW hitting a fresh 52-week low.
• Japan's Nissan dropped 7%, while Toyota declined 2.6%, amid investor concerns over U.S. exposure.
• South Korea’s Hyundai Motor also slipped by 3.4%, as analysts warned of indirect ripple effects from the EU and Japan tariffs.

German Automakers at the Epicenter

According to Rico Luman, Senior Sector Economist for Transport and Logistics at ING Bank, German carmakers are among the most vulnerable.

“German manufacturers exported 749,000 vehicles to the U.S. in 2024,” Luman noted. “Many of these vehicles are either assembled in or heavily reliant on parts from Europe. With these tariffs, it becomes very difficult to restructure supply chains in the short term.”

BMW and Mercedes-Benz, in particular, face a unique burden. Both companies are among the top U.S. exporters by vehicle value, shipping high-end models to markets around the world from their American plants. Now, they may face double tariffs—once on production inputs from Europe, and again when exporting from U.S. facilities to countries like China and Canada.

Automakers React: Price Hikes, Layoffs & Supply Chain Shifts

In just days after the tariffs went live, several automakers have announced or hinted at the following changes:

• General Motors signaled price increases on select models by up to $2,000 to offset tariff-related costs.
• Volkswagen plans to pause shipments of parts to U.S. factories for recalibration.
• Nissan is considering temporary layoffs at its Mississippi plant as supply costs surge.
• Toyota may delay its $1.3 billion investment expansion in its Kentucky facility until further notice.

Industry experts are warning that a full-blown trade war could have catastrophic effects on the $3.6 trillion global auto market, especially given how interconnected auto supply chains are across North America, Europe, and Asia.

Analysts: Strategic Shifts and Diversification Needed

Rella Suskin, equity analyst at Morningstar, highlighted the risks in an emailed comment:

“BMW and Mercedes could redirect production from North America back to Europe for models sold in the U.S., but that comes with increased costs and longer lead times.”

She added, “It’s not just about tariffs. It’s about how these companies navigate a completely new cost structure. Some automakers might look toward building new manufacturing hubs in Latin America or Southeast Asia, away from U.S. tariff reach.”

A Deeper Crisis Looming?

While automakers are trying to appear resilient, ING’s Luman warns that this is just the beginning.

“We are not seeing a full-on collapse yet,” he said. “But the landscape is changing. Automakers will need to rethink pricing strategies, restructure production footprints, and diversify market focus—especially toward Africa, Southeast Asia, and Eastern Europe.”

European auto groups are urging the European Commission to intervene through diplomatic and trade negotiation channels. The European Automobile Manufacturers Association (ACEA) has called the tariffs “destructive, unnecessary, and potentially destabilizing.”

Looking Ahead: What to Watch

Here are key dates and issues to keep on the radar:

• April 10 – China’s retaliatory tariffs on U.S. cars begin.
• May 3 – U.S. tariffs on imported auto parts expected to roll out.
• Mid-May – EU to respond with possible WTO consultations or countermeasures.

The road ahead looks rough for the automotive industry. In an already tight margin business, the added burden of geopolitics may become the defining challenge of the decade.

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