The administration of Donald Trump has announced an increase in tariffs on cars and trucks manufactured in the European Union, raising them from 15 percent to 25 percent.
The decision was framed by Trump as a response to what he described as delays by the EU in implementing the terms of a trade agreement reached in July of the previous year.
The move adds further strain to already tense transatlantic relations, which have been under pressure due to disagreements over foreign policy, including the EU’s refusal to align with Washington’s position on recent military tensions involving Iran.
Donald Trump announced that he intends to raise tariffs on cars and trucks imported from the European Union, citing what he described as non-compliance with a trade deal agreed last July. He said the tariff rate would increase from 15 percent to 25 percent.
In his statement, Trump did not provide evidence supporting the claim that the EU was failing to meet its obligations under the agreement. He also said that vehicles manufactured in the United States by European companies would be exempt from the proposed tariff increase.
At present, the additional tariffs have not yet taken effect. However, the announcement has triggered concern in Brussels, where the European Commission has rejected the allegation that it is not complying with the terms of the existing trade deal.
The situation has added to broader uncertainty in transatlantic trade relations, with markets and policymakers now awaiting clarification on whether the proposed tariff increase will be implemented and how the EU may respond if it does.
What is the current trade deal between the EU and US?
In July 2025, the European Union and US President Donald Trump concluded a wide-ranging trade agreement following months of negotiations marked by tariff disputes and political tension.
The deal capped US tariffs on most EU imports, including automobiles, at 15 percent, aiming to stabilise transatlantic trade relations after a period of escalating economic friction. As part of the agreement, the EU also committed to significant additional purchases of US energy and defence equipment, alongside its existing procurement levels.
Speaking after the signing ceremony at his Turnberry golf resort in Scotland, Trump described the agreement as the “biggest deal ever made,” framing it as a landmark achievement in US–EU economic relations.
US President Donald Trump said that under the new trade arrangement, the European Union would be “opening up their countries at zero tariff” for US exports, describing it as a major concession in the deal.
However, he added that US tariffs on steel and aluminium—set at around 50 percent for many countries—would not be reduced for EU products under the agreement. He also noted that aerospace-related tariffs would remain at zero for the time being.
The comments highlight the uneven structure of the deal, with significant tariff reductions on EU exports to the US, while key US industrial tariffs remain in place for European goods in certain sectors.
US President Donald Trump said the European Union would commit to purchasing large-scale US goods and services under the terms of the July trade agreement, including an estimated $750bn in US energy products, $600bn in investment in the United States, and additional military equipment worth hundreds of billions of dollars.
European Commission President Ursula von der Leyen said the agreement was intended to “bring stability” and “predictability” for businesses on both sides of the Atlantic. She also defended the deal as part of a broader effort to rebalance trade flows with the United States.
Trade figures, however, show continued volatility in the transatlantic balance. In 2024, the United States recorded a $236bn goods deficit with the EU. According to Eurostat, the EU maintained a goods surplus with the US in 2025, although it declined significantly from €81.2bn in the first quarter to €40.8bn in the third quarter.
Key European exports to the US include pharmaceuticals, automotive components, and industrial chemicals.
The July agreement has not yet been fully implemented. Its ratification was delayed in part due to political tensions, including disputes within the EU following US statements about Greenland, an autonomous territory of Denmark.
Further uncertainty was introduced after the United States Supreme Court ruled in February that certain sweeping global tariffs were unlawful. In response, Trump issued a new executive order under Section 122 of the US Trade Act of 1974, imposing a blanket 10 percent tariff on imports from trading partners, later raised to 15 percent.
Under the current framework, EU exports also face a separate 25 percent tariff on cars and trucks, in addition to the general tariff rate.
The European Parliament has since given conditional approval to the agreement, introducing safeguards that could suspend the deal if the US imposes additional tariffs above the 15 percent threshold or introduces new levies. However, final implementation still depends on approval from EU member states, while negotiations between EU institutions continue.
European Union member states are reportedly pushing for a swift agreement between the European Parliament and the European Council on implementing the bloc’s side of the July trade deal, according to diplomats speaking to Reuters.
The urgency reflects concerns within several member governments about delays in finalising the agreement, particularly as trade tensions with the United States remain unresolved and additional tariffs have been threatened or applied in certain sectors.
Friedrich Merz, whose country is expected to be among the most affected by potential US tariff increases on automobiles, called for rapid progress on the deal. Speaking to broadcaster ARD, he said: “The Americans have it finalised, and the Europeans haven’t – and that’s why I hope we can reach an agreement as quickly as possible.”
His comments highlight growing pressure within the EU to finalise its internal approval process, as policymakers seek to reduce uncertainty for export-dependent industries, particularly the automotive sector.
How significant are the new tariffs? Are they legal?
Trade lawyers Shantanu Singh and Vikram Naik, both based in India, said that prior to the July agreement between the European Union and the United States, US tariffs on cars and auto parts had reached as high as 27.5 percent. They noted that the new deal reduced this to a 15 percent ceiling, making the automotive sector one of its key beneficiaries.
However, they warned that any move to raise tariffs again—such as a proposed increase to 25 percent—would carry significant commercial and political consequences. According to them, it signals to trade partners that agreed tariff limits may be vulnerable to reversal, potentially weakening confidence in dispute resolution mechanisms and the durability of trade agreements.
Peter Chase said the latest announcement reflects impatience from US President Donald Trump over the EU’s slower internal procedures in implementing the so-called “Turnberry Accord,” the informal name given to the trade understanding reached last year.
Chase added that the significance of any tariff threat remains uncertain until it is formalised through an executive order. He also suggested that, in practical terms, additional tariffs on European cars may not immediately reshape trade flows, depending on US consumer demand and the broader cost of imported vehicles.
He noted that US tariffs already apply to cars and parts from multiple countries, which also affects European manufacturers operating within the United States, further complicating the competitive dynamics of the US auto sector.
From a legal perspective, Camille Reverdy, an affiliate fellow at the Brussels-based think tank Bruegel, said the US may justify such tariffs under Section 232 of the Trade Expansion Act, which allows measures on national security grounds. However, she noted that recent US Supreme Court decisions have weakened the legal robustness of such justifications.
She added that the EU could challenge the measures under international trade rules, including at the World Trade Organisation, arguing that additional tariffs would breach existing commitments under the trade framework.
What is EU’s car trade with the US like?
A January report by Car Sales Statistics highlighted the structure of the US automotive market in 2025, identifying General Motors (GM), Toyota, Ford, Honda, and the FCA (Stellantis) group as the largest light-vehicle manufacturing groups operating in the United States.
The report also ranked Toyota, Ford, Chevrolet, and Honda among the best-selling car brands in the US market.
Overall, US light-vehicle sales reached approximately 16.3 million units in 2025. German automotive brands—including Volkswagen, BMW, Mercedes-Benz, Audi, and Porsche—accounted for around 1.2 million of those sales, representing roughly a 7.5 percent market share.
The figures underline the scale of the US automotive market and the relatively smaller, though still significant, share held by European manufacturers within it.
German Member of the European Parliament Bernd Lange said that the latest US tariff threat appears to be primarily directed at Germany.
He argued that there are “no legal or economic reasons” for the proposed measures and described them as politically motivated, stating that the US President Donald Trump is specifically targeting German car manufacturers.
His comments came shortly after Germany’s Chancellor Friedrich Merz criticised US actions in Iran, following which Trump announced the withdrawal of 5,000 US troops from the region, further adding to political tensions between Washington and European leaders.
Trump has repeatedly argued that the European Union does not import enough US-made vehicles, framing the imbalance in automotive trade as justification for tariff increases.
According to the European Automobile Manufacturers Association (European Automobile Manufacturers Association), the United States remains the second-largest destination for EU vehicle exports after the United Kingdom. The group reported that the US accounted for 18.4 percent of EU automotive export value in 2025, down from 21.9 percent in 2024.
Trade analysts warn that Germany is likely to be the most affected EU economy due to its export-heavy automotive sector. However, countries such as France and Italy are also expected to feel secondary impacts, while supply-chain-linked economies like Slovakia, the Czech Republic, and Hungary could face indirect pressures through reduced demand in European manufacturing networks.
European Commission spokesperson Thomas Regnier said the EU remains calm in response to the tariff threats, adding that Brussels is focused on implementing existing agreements in the interest of businesses and citizens.
At the same time, EU Trade Commissioner Maroš Šefčovič is scheduled to meet US Trade Representative Jamieson Greer ahead of upcoming G7 trade discussions, as both sides attempt to manage escalating tensions.
The European automobile industry has urged a rapid resolution to the dispute, while analysts note that the EU retains potential countermeasures, including retaliatory tariffs and other trade defence instruments if negotiations fail.
According to Peter Chase of the German Marshall Fund, the dispute reflects ongoing uncertainty over both sides’ commitment to previously agreed trade terms. He cautioned that while dialogue will continue, the EU should be careful about making new concessions given the volatility of US trade policy in recent years.
The European Union could also pursue dispute settlement at the World Trade Organization, according to trade experts.
Beyond direct trade policy responses, analysts say the EU is likely to rely on industrial policy measures to support its automotive sector. These measures would aim to strengthen the competitiveness of European carmakers, reduce vulnerability to external shocks, and reinforce supply chain resilience.
Experts also highlight the importance of promoting market diversification outside the United States, as European exporters look to reduce dependence on a single major destination. This strategy is seen as part of a broader effort to manage geopolitical and trade uncertainty affecting global automotive trade flows.
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