EU car industry sees relief - and pain - in US trade deal
German auto companies in particular were in for a great deal of export pain, as their share prices indicated.
Shares in Porsche, Volkswagen, BMW and Mercedes-Benz all lost more than three per cent in trading Monday.
The agreement eases "the intense uncertainty surrounding transatlantic trade relations in recent months", Europe's main auto group, the European Automobile Manufacturers' Association (ACEA), said in a statement welcoming the deal "in principle."
But it noted that the 15 per cent US tariffs imposed on EU goods including cars "will continue to have a negative impact not just for industry in the EU but also in the US."
German Chancellor Friedrich Merz said his country's economy – the biggest in Europe – would face "substantial damage" from the US tariffs agreed in the deal.
But, he said, "we couldn't expect to achieve any more."
The United States is a key market for European automakers, which last year sent nearly 750,000 of its cars to it, representing nearly a quarter of the sector's overall exports.
While the 15 per cent rate is less than the 27.5 per cent tariff US President Donald Trump imposed in April, it is far higher than the 2.5 per cent levy European car manufacturers faced before Trump's return to the White House.
A German analyst, Stefan Bratzel, said it could be expected that US consumers would pay two-thirds of the price hike caused by the tariff, while car exporters would probably swallow the other third.
For those companies, "we might have to see whether it is possible for cost-cutting somewhere else," he said.
The 15 per cent rate was similar to one reached in the deal the United States struck with Japan, another major car-exporting country.
For German carmakers, the United States represents around 13 per cent of their exports.
In the short term, a 15 per cent tariff will cost them "billions each year", said Hildegard Mueller, head of the national automobile manufacturers' association VDA.
The situation has forced all the automakers to lower their 2025 profit forecasts and to look for ways to alleviate the pressure.
BMW boss Oliver Zipse suggested in June that Europe could get rid of its own tariffs on imported vehicles made in the United States.
That could benefit his company, which last year exported 153,000 vehicles from the Americas, and imported into Europe 92,000 cars that were assembled in the United States.
Similarly, Mercedes is looking for help from the national or EU level.
"The deal reached between the EU and the US is a first, important step that needs to be followed by other measures," a company spokeswoman told AFP.
"Politicians need to keep working to get rid of obstacles getting in the way of free trade. We are counting on the EU and US to continue their constructive dialogue in the future," she said.
Volkswagen is also facing tariff hardship for vehicles it makes in Mexico for the US market, announcing that its first-quarter results had been shaved by around 1.3 billion euros (US$1.5 billion) from a year earlier.
Its Porsche and Audi cars are also exposed as they have no production factories in the United States.
On Monday, Audi cut its revenue and profit targets for this year, though it said it expects them to rise next year.
Volkswagen CEO Oliver Blume has suggested reaching a side deal with the United States that would take into account investments his company could make in that country.
Volvo Cars, the Swedish carmaker owned by China's Geely Holding, has announced steep second-quarter losses because of tariffs.
The European auto sector is now lobbying the European Commission to delay the timetable for making the European car market go all-electric, and to provide some sort of industry stimulus.
With no help, European car factories, already facing uphill challenges, "will have to reduce production," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research.
That, he said, could affect up to 70,000 jobs in Germany alone.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Sun
24 minutes ago
- The Sun
South Korea to aid firms facing higher US tariffs amid trade deal
SEOUL: South Korea will prepare measures to help companies cope with higher U.S. tariffs and expand into new markets, the Finance Ministry said on Tuesday, as it kicked off a task force to prepare the new administration's economic policy plans. On the domestic front, the government will come up with measures to boost short-term demand, as well as financial support for mid- to long-term technology development to enhance market competitiveness, it said in a statement. South Korea reached a trade deal with the U.S. last week, just days before President Donald Trump's threatened 25% tariff rate was due to come in on its exports to the United States. The trade deal set tariffs on exports from the Asian country at 15%, still higher than a baseline 10% rate and the near zero tariffs for exports under a Korea-U.S. free trade agreement. Still, topics left unresolved by the deal provide scope for more disputes as the two countries prepare for a summit between Trump and new South Korean President Lee Jae Myung in the coming weeks. Trump may use the summit to try to squeeze more concessions on areas such as defence costs and corporate investments, left out of the deal, while non-tariff barriers and currency could prove thorny issues, experts said. South Korea's Finance Ministry, however, sought to give a positive spin on the agreement. The deal reduced uncertainty over the trade environment, while a $350 billion investment package included in the deal will provide new business opportunities for companies, deepen economic cooperation between the two countries, and contribute to a more stable supply chain, the ministry said. The administration of President Lee also plans to prepare policy measures to foster new industries, such as artificial intelligence, semiconductors and 'K-contents' and include them in economic growth strategies and budget plans due to be announced later this month. K-contents refers to a range of cultural and entertainment goods produced by the country ranging from K-pop to Korean dramas that have boomed globally. The ministry vowed to bring regulatory improvements to vitalise business activity, as it kicked off a meeting with the country's major business groups. Asia's fourth-largest economy grew in the second quarter at the fastest pace in more than a year on rebounding consumer spending and a surge in technology exports, but still faces headwinds from slowing global trade amid the sweeping tariffs. The International Monetary Fund last week raised its outlook for most advanced and emerging economies this year based on developments around U.S. tariff negotiations, but South Korea was among the exceptions, with its 2025 growth forecast revised down to 0.8% from 1.0%. - Reuters
The Star
an hour ago
- The Star
More than 10,000 European hotels seeking damages from Booking.com
The hotels cite a ruling by the European Court of Justice dated September 19, 2024 that essentially states that the best-price clause is illegal. — REUTERS/Dado Ruvic/Illustration/File Photo ROME: More than 10,000 European hotels are joining collective legal action against Amsterdam-based to seek compensation for losses caused by the online travel agency's use of so-called "best price" clauses. According to reports, the best price clauses could be in violation of antitrust law, but a court in Amsterdam must ultimately resolve the case. These clauses had prevented hotels from offering their rooms at a lower price outside the platform, such as on their own website. The aim is to prevent so-called "free-rider" bookings where customers find the hotel on and then go to the hotel's own website to make their booking. The hotels cite a ruling by the European Court of Justice dated September 19, 2024 that essentially states that the best-price clause is illegal. The court found that platforms like could operate without rules of this kind. This made little difference to travellers. had abolished the clauses in Europe following the European Union's Digital Markets Act of 2024. "European hoteliers have long suffered from unfair conditions and excessive costs. Now is the time to stand together and demand redress," Alexandros Vassilikos, president of the HOTREC hospitality sector association, said. "This joint initiative sends a clear message: abusive practices in the digital market will not be tolerated by the hospitality industry in Europe," he added. The aim of the collective action, known as a class action lawsuit, is to secure compensation for damages incurred between 2004 and 2024. The action, which is being supported by HOTREC and more than 30 national hotel associations, will be heard by a Dutch court and coordinated by the Hotel Claims Alliance. Despite the criticism, is essential for many hotels, as it allows them to reach a large customer base. According to a study conducted by HOTREC and a Swiss hoteliers' college, Booking Holdings held a market share of 71% across Europe in 2023, while the share of direct bookings has declined considerably over recent years. – dpa
New Straits Times
an hour ago
- New Straits Times
Nissan begins talks with union to cut jobs at European regional office
TOKYO: Nissan Motor has begun negotiations with the union representing staff at its European regional office about changes that will include job losses, according to a company document and internal emails. The struggling Japanese automaker, which has embarked on a major restructuring, confirmed it has entered consultations with staff representatives at Nissan Automotive Europe, its regional office in Montigny-le-Bretonneux, France, which has around 560 staff. The office, which also oversees Nissan's operations for Africa, the Middle East, India and Oceania, is set to undergo major changes, according to a person with knowledge of the issue who declined to be identified. Management and the union agreed to discuss voluntary redundancies before any forced layoffs, the document seen by Reuters showed. Talks are expected to conclude by October 20, with full details to be shared with staff in November, the document and the emails said. "We are working diligently and respectfully with all parties to ensure that this process is conducted with care, transparency and in full compliance with legal requirements," Massimiliano Messina, Nissan's vice chairperson for the region, said in a July 31 email. Messina also said in the email that no decisions had yet been made. After taking the helm in April, CEO Ivan Espinosa announced a sweeping restructuring that includes cutting about 15 per cent of Nissan's workforce, slashing global production capacity by nearly 30 per cent to 2.5 million vehicles and the number of its manufacturing sites to 10 from 17. The automaker, which has seen weak sales in China and the U.S. compound pain brought on from an expansionist strategy, hopes to save 500 billion yen (US$3.4 billion) with the restructuring. In recent developments, Nissan said last week it would stop output at its Civac plant in Mexico by March next year. It also said it will end car production at its Oppama plant in Japan by March 2028 and at Nissan-Shatai's Shonan factory by March 2027. The automaker employs nearly 19,000 people across Europe, Africa, the Middle East, India and Oceania, with close to 60 per cent based in Europe, according to a diversity report published in October 2024.
