Europe’s car industry is back at the center of a transatlantic trade fight after US President Donald Trump threatened to raise tariffs on cars and trucks made in the European Union from 15 percent to 25 percent.
The threat matters because the auto sector was one of the main beneficiaries of a July 2025 US-EU trade agreement that capped tariffs on most EU goods, including cars, at 15 percent. No additional auto tariffs have yet taken effect, and the legal and diplomatic path for any increase remains unsettled.
Trump said last week that he would raise tariffs because the European Union was not complying with the trade deal agreed last July. In a social media post cited by Al Jazeera, he wrote that the EU was “not complying with our full agreed to Trade Deal,” but did not provide evidence for the claim. He also said vehicles made in the United States by EU companies would be exempt.
The European Commission has rejected Trump’s accusation. A commission spokesperson, Thomas Regnier, told reporters on Monday that the EU had faced such threats before and remained “very calm” and focused on enforcing the joint statement in the interests of companies and citizens.
Why cars are the pressure point
Autos sit at the heart of the dispute because the July agreement lowered the ceiling for car and car-parts tariffs to 15 percent. Trade lawyers Shantanu Singh and Vikram Naik told Al Jazeera that, before the deal, cars and car parts faced US import tariffs of up to 27.5 percent, making a threatened return to 25 percent commercially significant.
The United States is a major market for EU-made vehicles. Peter Chase, a senior fellow focused on the transatlantic economy at the German Marshall Fund’s Brussels office, told Al Jazeera that the EU sells nearly $40bn in finished cars and trucks to the US each year. The European Automobile Manufacturers Association said the US was the second-largest market for new EU vehicle exports after the United Kingdom, accounting for 18.4 percent of the EU export market by value in 2025.
Germany is likely to be the most exposed EU economy because of its reliance on car exports, according to Camille Reverdy, an affiliate fellow at the Brussels-based think tank Bruegel. Other producers, including France and Italy, could also be affected, while Slovakia, the Czech Republic and Hungary are vulnerable through their roles in European and German auto supply chains.
A deal still not fully in force
The trade agreement itself is not yet fully implemented. EU lawmakers initially paused ratification in January after Trump threatened to annex Greenland, an autonomous territory of Denmark. The future of US trade deals was also complicated in February when the US Supreme Court declared Trump’s sweeping global tariffs unlawful.
Trump later used Section 122 of the US Trade Act of 1974 to impose a blanket tariff on US trading partners, first at 10 percent and later at 15 percent, the highest rate allowed under that law. The new threat would put EU cars and trucks at 25 percent, above the broader 15 percent tariff level.
The European Parliament has given conditional approval to the trade deal and added safeguards that would allow the EU to suspend the agreement if the US imposes tariffs above 15 percent or introduces new tax levies. EU member states have not yet agreed to those proposals, and representatives of the European Parliament and European Council are due to resume negotiations on Wednesday.
German Chancellor Friedrich Merz, whose country would face heavy exposure to higher car tariffs, told broadcaster ARD that the United States had finalized its side while Europe had not, adding that he hoped the EU could reach agreement quickly.
The legality of any new tariff increase is still unclear. Reverdy said the US could seek to justify auto tariffs under Section 232 of the Trade Expansion Act, which has been used on national security grounds, but she also noted that recent Supreme Court rulings weakened the legal robustness of that route. From the EU’s perspective, she said, the threat could violate existing trade agreements and be challenged at the World Trade Organization.
European Commissioner for Trade Maros Sefcovic is scheduled to meet US Trade Representative Jamieson Greer before a G7 trade ministers’ meeting in Paris. The EU could keep negotiating, challenge the measure through trade channels or retaliate with tariffs on US goods. For now, the industry is left watching whether Trump’s threat becomes a formal order — and whether Brussels can close its own internal process before the dispute escalates.
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