What can Germany do to counter Trump's new 25% car tariffs? | DW News

Key Concepts:

• Tariffs: Taxes imposed on imported goods.
• Trade War: An economic conflict where countries impose tariffs or other trade barriers on each other.
• Globalization: The increasing interconnectedness and interdependence of countries through trade, investment, and cultural exchange.
• Counter-tariffs: Tariffs imposed by a country in response to tariffs imposed by another country.
• Free Trade: A policy where countries do not impose tariffs, quotas, or other trade barriers on each other.
• Economic World Order: The established system of international trade and economic relations.

I. Trump's Car Tariffs Announcement

• US President Donald Trump announced a 25% tariff on all car and light truck imports into the US.
• The White House claims this move will spur growth in the American economy and raise hundreds of billions of dollars a year.
• The application of these tariffs could be complicated due to US car manufacturers sourcing components internationally, particularly from Canada and Mexico.

II. International Reactions

• European Commission President Ursula von der Leyen expressed deep regret, stating that "tariffs are taxes, bad for businesses, worse for consumers in the US and the EU." She affirmed the EU will seek negotiated solutions while safeguarding its economic interests.
• Other world leaders have also expressed disappointment, viewing the tariffs as a "direct attack."
• Japan is strongly requesting the US not to apply the 25% tariffs. They are considering options to protect their national interest.

III. Impact on Top Auto Product Suppliers to the US

• The top five countries most affected by Trump's car tariffs are Mexico, Japan, South Korea, Canada, and Germany.
• Data from 2024 shows the value of their exports to the US in billions of dollars.

IV. Impact on German Car Makers

• The tariffs could be "devastating" for German car makers, impacting billions of dollars in exports.
• This comes at a particularly bad time, as China, previously Germany's biggest export market, has declined.
• German car makers are already experiencing profit declines of 30-35%, leading to potential job cuts and plant closures.

V. Impact on US Car Companies

• The tariffs are unlikely to help US car companies, as they also rely on international suppliers.
• GM, Ford, and Chrysler (Stellantis) depend on parts made in Canada and Mexico.
• Approximately 60% of the components in an "American-made" car are sourced from abroad, making them subject to the 25% tariff.

VI. Impact on the Global Economy

• The tariffs question the concept of global free trade and risk destroying the economic world order.
• They escalate a trade war that began with tariffs on steel and aluminum, leading to counter-tariffs from other countries.
• The US is becoming an unreliable trading partner, with Trump considering higher tariffs on the EU and Canada while offering China a discount for TikTok.

VII. German Government and Automaker Reactions

• The German government, including Economy Minister Robert Habeck, has indicated they "will not take this lying down" and seek a clear EU response.
• German car industry leaders have expressed concern, stating the tariffs place a significant burden on German and US companies.

VIII. Impact on the German Economy

• Germany imports over 400,000 cars to the US each year, accounting for 13% of German car exports.
• The car industry directly supports 800,000 jobs in Germany, with additional jobs in peripheral industries.
• The tariffs come at a bad time for the German economy, which has been in recession and is losing market share to China.

IX. Potential Countermeasures

• The EU may retaliate with counter-tariffs, similar to those imposed on whiskey and Harley-Davidson during Trump's first presidency.
• EU leaders aim for a swift and well-orchestrated response but want to avoid a tariff spiral or unnecessary escalation.

X. Synthesis/Conclusion

Donald Trump's imposition of a 25% tariff on car and light truck imports has triggered widespread international concern and potential economic disruption. The move threatens to harm not only foreign car manufacturers but also US companies reliant on international supply chains. The potential for retaliatory measures and the escalation of a trade war pose significant risks to the global economy, particularly at a time when major economies like Germany are already facing economic challenges. The EU is under pressure to formulate a coordinated response that protects its interests without further destabilizing international trade relations.