President Donald Trump announced that the United States will impose a 25% tariff on all passenger vehicles and light trucks imported from the European Union, up from the 15% rate established under the bilateral trade agreement reached in late 2025. Trump accused the EU of 'not complying with the spirit or letter of our deal' and cited the bloc's continued non-tariff barriers on American agricultural products and its failure to increase LNG purchases from U.S. producers as justification for the punitive escalation.
The tariff — which takes effect June 1 — would not apply to vehicles manufactured at European automaker factories in the United States, drawing a clear line designed to incentivize production relocation. The head of the European Parliament's trade committee, Bernd Lange, called the move 'unacceptable' and accused Washington of being an 'unreliable partner.' European Commission President Ursula von der Leyen said the EU would respond 'proportionally and swiftly.'
Auto Sector Reaction
European automaker shares tumbled: BMW AG (BMW.DE) fell 5.2%, Mercedes-Benz (MBG.DE) declined 4.8%, Volkswagen AG (VOW3.DE) lost 6.1%, and Stellantis (STLA) dropped 4.4%. The Stoxx Europe Automobiles & Parts Index fell 4.6% — its worst session since the original tariff announcement in March 2025. U.S.-listed auto stocks were mixed: General Motors (GM) gained 1.2% and Ford (F) rose 0.8% on competitive advantage, while Tesla (TSLA) was flat as its domestic production insulates it.