United States President Donald Trump announced via Truth Social that he will increase tariffs on cars and trucks imported from the European Union (EU) to 25%, citing the EU's failure to comply with a previously agreed-upon trade deal. Trump stated that the new tariff rate will take effect next week and clarified that vehicles produced in U.S. plants by European automakers will not be subject to the tariff. He emphasized ongoing investments in U.S. automobile and truck manufacturing, noting that over $100 billion is being invested in new plants, which he described as a record in the industry's history [1][2].
While Trump announced the tariff hike, he did not specify the legal authority under which the new levies would be imposed. This omission is notable given the Supreme Court's February ruling that a significant portion of Trump's previous tariff agenda was illegal, specifically rejecting the use of the International Emergency Economic Powers Act (IEEPA) for such measures. Following the ruling, Trump signed an executive order for a new 10% global tariff, later stating he would raise it to 15%, but these tariffs are subject to a 150-day limit under Section 122 of the Trade Act of 1974 [2].
The Trump administration had already implemented 25% tariffs on vehicles and certain auto parts from the EU in the previous year, citing national security risks under Section 232, and these tariffs remain in effect. European automakers such as Mercedes, BMW, and Volkswagen, which import a significant share of their U.S.-sold vehicles from Europe, are identified as the most likely to be impacted by the increased tariff rate [2].
Market reaction to the announcement was muted, with the US Dollar (USD) remaining relatively unchanged near the 98.00 price zone. On the day of the announcement, the USD was the strongest against the Japanese Yen, appreciating by 0.14%, while it weakened by 0.14% against the Euro and showed minor changes against other major currencies [1].
The EU had previously warned in February that its trade deal with the U.S. could be at risk following the announcement of new tariffs and postponed its planned vote on the agreement [2]. No forward-looking analyst opinions were provided in the sources.
CONCLUSION
President Trump's announcement of a 25% tariff on EU cars and trucks marks a significant escalation in U.S.-EU trade tensions, with major European automakers likely to be affected. Despite the legal uncertainties surrounding the tariff's implementation, the immediate market reaction was limited, as reflected in stable currency movements. The development raises questions about the future of the U.S.-EU trade relationship.