If United StatesPresident Donald Trumpimposes a 25% tariff on European cars, production will decline, and the question is whether European automotive companies would survive, especially given the pressure from more competitive Chinese cars. Even if the US president does not impose the tariffs he is threatening, it will not be easy for the European auto industry.

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Accusing Brussels of failing to fulfill its obligations under the EU-US trade agreement, which fully entered into force last July, Trump announced an increase in tariffs on European-made cars from 15% to 25%, but postponed their implementation until July 4. If tariffs increase, the Germans, for whom the auto industry is the engine of economic development, have already calculated the cost at €15 billion per year.

According to an analysis by the Kiel Institute for International Economics, these losses could reach about €30 billion in the long term.

Even without additional tariffs, the German auto industry is struggling. BMW’s first-quarter profit fell by as much as 25%, largely due to strong competition from Chinese cars. Mercedes and Audi also had a weak start to the year. According to its own assessment, Audi could face major problems because it has no production in America. It has already announced plans to cut 7,500 jobs by 2029.

The German Automotive Industry Association estimates that the industry’s crisis could cost the country 225,000 jobs by 2035. According to the latest analysis, the expected decline in employment is more severe than initially predicted. Earlier studies expected a loss of around 190,000 jobs between 2019 and 2035, given that electric-vehicle production is less complex than that of internal-combustion engines. The reality, they say, is even worse. Around 100,000 jobs have already been lost since 2019.

Not only the German auto industry but also the European auto industry in general has found itself squeezed between technologically and price-competitive Chinese cars and the challenge of entering the American market, since Trump introduced tariffs on European car imports that now amount to 15%.

The US is a key market for European cars, accounting for almost a quarter of total production. Tariffs and rising energy prices resulting from the crisis in the Middle East are two factors that cumulatively affect the automotive industry’s challenges.

The Kiel Institute probably made that calculation based on a reduction in exports, and the domestic market is not capable of absorbing, or rather replacing, that part of production that would go abroad. This will be reflected in reduced production, which also implies losses.

Source: Global Research