Germany has said it “will not give in” and that Europe must “respond firmly” as US President Donald Trump targets imported cars and car parts with a 25% tax in his latest tariffs.
Other major world economies have vowed to retaliate, with France branding the move “very bad news”, Canada calling it a “direct attack”, and China accusing Washington of violating international trade rules.
Early on Thursday, shares in Frankfurt for Porsche, Mercedes and BMW fell sharply alongside French firm Stellantis, the maker of Jeep, Peugeot and Fiat.
Trump has threatened to impose “far larger” tariffs if Europe works with Canada to do what he describes as “economic harm” to the US.
The fresh car tariffs will come into effect on 2 April, with charges on businesses importing vehicles starting the next day. Taxes on parts are set to start in May or later.
Trump has long maintained the tariffs are part of a drive to help US manufacturing and says if cars are made in America there will be “absolutely no tariff”.
Tariffs are taxes charged on goods imported from other countries.
While the measures can protect domestic businesses, they also raise costs for businesses reliant on parts from abroad.
The companies that bring the foreign goods into the country pay the tax to the government. Firms may choose to pass on some or all of the cost of tariffs to customers.
The US imported about eight million cars last year – accounting for about $240bn (£186bn) in trade and roughly half of overall sales.
Mexico is the top supplier of cars to the US, followed by South Korea, Japan, Canada and Germany.
Analysts have estimated that tariffs on parts just from Canada and Mexico could lead to costs rising by $4,000-$10,000 depending on the vehicle, according to the Anderson Economic Group.
German economy minister Robert Habeck said the European Union must “respond firmly”.
“It must be clear that we will not give in to the US. We need to show strength and self-confidence,” he added.
France backs this joint approach, with its finance minister Eric Lombard saying Europe’s “only solution” is to retaliate with tariffs on US products.
“We are in a situation where we are being targeted. Either we accept it, in which case this will never stop, or we respond,” Lombard added.
He emphasised the need to “rebalance the playing field” so the US was “forced to negotiate”.
Canadian Prime Minister Mark Carney called the tariffs a “direct attack” on his country and its car industry, adding it “will hurt us” but trade options were being discussed.
In the UK, car industry body the SMMT said the announcement of the tariffs by Trump on Wednesday was “not surprising but, nevertheless, disappointing”.
Uniparts founder John Neill said the Trump tariffs were “a gift to the Chinese”, because international consumers would respond to a trade war by buying Chinese alternatives.
Meanwhile, China accused Trump of violating World Trade Organisation rules.
“There are no winners in a trade war or a tariff war. No country’s development and prosperity has been achieved by imposing tariffs,” a spokesman for the foreign ministry said.
There are warnings from Japan that there will be a “significant impact” on the economic relationship it shares with the US. A government spokesman described the measures as “extremely regrettable” and said officials have asked the US for an exemption.
In South Korea, a day before the latest levy, Hyundai announced it would invest $21bn (£16.3bn) in the US and build a new steel plant in Louisiana.
Trump hailed the investment as a “clear demonstration that tariffs very strongly work”.
Bosch – based in Germany – says it has confidence in the “long-term potential” of the North American market and will continue to expand its business there.
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