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EU-US Trade Deal Could Help European Automakers Avoid Up to €4 Billion in Losses

Plastmatch Global Digest 2025-07-29 13:41:17

According to Bloomberg, data from Bloomberg Intelligence shows that the trade agreement between the EU and the US has brought a profit increase of 4 billion euros (approximately 4.7 billion US dollars) to BMW Group, Mercedes-Benz Group, and other European car manufacturers.

Image source: BMW Group

During the morning trading session on July 28, European auto stocks rose following reports that the United States would lower the tariff rate on cars imported from the European Union from 27.5% to 15%. Michael Dean, an analyst at Bloomberg Intelligence, pointed out in a report that BMW and Mercedes-Benz would also benefit, as the approximately 185,000 cars exported annually from their U.S. factories to the EU could be exempted from tariffs.

The trade agreement reached between the EU and the United States has brought a certain degree of clarity to companies such as Mercedes-Benz, BMW, Porsche, and Volvo in the crucial EU market. Since U.S. President Trump imposed tariffs in April this year, automakers have warned that this would add billions of dollars in additional costs and complicate supply chains, with several companies having already canceled or lowered their financial forecasts for this year.

Automotive analyst Matthias Schmidt commented on the evening of July 27 regarding the Euro-American trade agreement: "Under what initially seemed like a terrible situation, this is already the best outcome. I believe the CEOs of Germany and Sweden will be able to sleep more peacefully tonight than they have in recent weeks."

The conclusion of this trade agreement has had a particularly significant impact on German automakers, prompting executives to travel to the United States in an attempt to negotiate directly with the Trump administration. This indicates that the U.S. market remains crucial, as its profit margins are higher than those in Europe or China. So far, the negotiations have achieved only partial results. The core demand of German car companies is for the approximately 420,000 vehicles exported from U.S. factories by Volkswagen Group, BMW, and Mercedes to be eligible for import and export offset policies. However, the final agreement only exempts vehicles re-exported to the European Union, while most of the remaining exported vehicles will still face tariffs.

Moreover, the new tariff rates imposed by the United States on EU-produced cars are much higher than the 2.5% level before Trump's actions, forcing companies to weigh whether to raise car prices or shift more production to the U.S. These tariffs have increased the challenges faced by European car manufacturers, including intensified competition in the Chinese market and high investment costs in the context of lower-than-expected demand for electric vehicles.

On July 25, Volkswagen Group lowered its full-year financial forecast due to the impact of tariffs on its brands Porsche and Audi, both of which import cars sold in the United States. Earlier this month, Stellantis announced an unexpected net loss for the first half of the year after canceling multiple investments and accounting for the impact of trade barriers. Volvo Cars also suffered a blow from tariffs affecting its luxury SUVs sold in the U.S., resulting in an impairment loss.

Manufacturers are taking action to respond to these tariffs. Volkswagen Group has pledged to increase investment in the United States, and the Audi brand is considering establishing a local production base. Mercedes-Benz has announced plans to move the production of its GLC-class SUV to a factory located in Alabama, USA.

The German Chemical Industry Association (VCI), whose members include manufacturers like BASF that supply products to car manufacturers, has warned that the new tariff policy will harm the domestic industry in Europe in the long run. VCI President Wolfgang Große Entrup stated in a press release: "If you are bracing for a hurricane, then a storm will make you grateful. Nevertheless, the agreed tariffs are still too high. European exports are losing competitiveness."

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EU-US Trade Deal Could Help European Automakers Avoid Up to €4 Billion in Losses

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