Late last week, the US President said that he would increase customs duties on European Union cars and trucks entering American soil in the coming days, raising the rate to 25% from the previous 15%. Donald Trump believes that the trade agreement between the United States and the European Union is not being respected.

The White House nevertheless specified that there would be no tariffs "if they build cars and trucks in plants in the United States," before adding: "many car and truck plants are currently being built, with over $100bn invested, a RECORD in the history of car and truck manufacturing".

All Invest Securities estimates that the impact would be limited for Renault (+0.47%), which is absent from the US market, and relatively contained for Stellantis (-0.26%), as the majority of its production destined for the US is localized in North America.

Germany on the front line

In contrast, the French financial services firm rightly believes that German manufacturers and equipment suppliers are the most exposed. Volkswagen (-1.46%) would be "on the front line," as it imports a large share of its vehicles (notably Porsche and Audi) to the land of Uncle Sam. Mercedes-Benz (-2.01%) and BMW (-1.95%) would also be affected, "despite a local industrial base, due to a mixed model combining domestic production and imports from Europe,"  analysts say. Equipment suppliers are also retreating, as seen with Continental, which is shedding 4.41%, the sharpest faller in the DAX 40.

All Invest Securities adds that beyond the short-term impact, the tariff hike strengthens the incentive to localize production in the United States, since locally produced vehicles are not affected by this measure, as Donald Trump pointed out. It could accelerate industrial investment across the Atlantic, to the detriment of the European production base.

In this context, the German automotive federation is calling for a de-escalation, highlighting the risk of high costs for the European industry and an impact on the American consumer. A tariff increase from 15% to 25% could cost Germany 0.3% of GDP, according to the Kiel Institute.

Kiel details the consequences

According to the economic research center, short-term production losses in Germany are estimated at nearly 15 billion euros, while in the long term they could climb to €30bn. Other European economies with strong automotive sectors, such as Italy, Sweden, or Slovakia, would also record notable declines.

According to Kiel, for Germany, European Union countries remain the primary destination for automotive exports, while the US constitutes the most important individual market, surpassing China and the UK.