The president of the United States, Donald Trump, said this Friday that he would reveal new tariffs targeting the automotive sector, joining a broad push to reshape global trade and press companies to relocate production back to the United States. “We will implement it around April 2”, Trump told reporters in the Oval Office while signing energy policy measures.
The available information indicates that the United States will not apply a uniform 10 percent or 25 percent tariff to European imports. Instead, it will set specific rates based on the tariffs and barriers that each nation imposes on the United States. In the case of the European Union, Washington views it as highly protectionist by framing what Trump calls a “hidden tariff” through value-added tax, which varies from about 17 percent in Luxembourg to roughly 27 percent in Hungary. “There is a reason Germany sells more cars to us than we sell to them, and it is not the quality of American manufacturing or design. It is simply because of unfair trade practices, and that is deadly. It is a hidden tariff”, he stated.
Trump’s remarks about tariffs have sparked more uncertainty, and even the financial press has questioned whether he understands that VAT is not a tariff, leading to confusion. The protectionist stance is already showing up in early indicators, with a noticeable drop in Tesla sales in Europe among the effects cited in some analyses.
The European automotive sector could face a meaningful and rapid rise in prices in the United States starting in April as a result of tariff increases. At present, Washington applies a 2.5 percent tariff on imported vehicles, but the new framework could raise the overall rate to as much as 27 percent when the VAT element is considered. The European Union currently imposes a 10 percent tariff on imported cars, plus the EU-wide VAT, typically at least 17 percent. Therefore, under the proposed policy, a combined burden of 27 percent is possible when the US rate is added to the VAT, potentially lifting the total cost that buyers pay for European vehicles.