The increase in tariffs announced by American President Donald Trump for cars and trucks imported from the EU would generate significant costs for German car manufacturers, according to an estimate by the Kiel Institute for the World Economy (IfW).
The tariff increase for European cars imported by the US would cost the German auto industry almost 15 billion euros, announced the Kiel Institute for the World Economy (IfW) on Saturday.
The estimate highlights the exposure of the EU's largest economy to import tariffs from the US, which have already incurred costs of billions of euros for the German auto industry, as reported by Reuters.
Trump stated on Friday that starting next week he will increase auto tariffs to 25%, up from the previously agreed 15%, stating that the bloc did not comply with the trade agreement with Washington.
"The effects would be substantial," said IfW President Moritz Schularick, with production losses expected to increase to around 30 billion euros in the long term, according to the institute's analysis.
"Germany's already slow growth rate would be strongly affected," said economist Julian Hinz from IfW.
The institute currently expects the German economy to grow by 0.8% this year.
Other European economies with significant auto sectors - including Italy, Slovakia, and Sweden - could also suffer significant losses, the source added.
Caution is recommended with Trump
The chief adviser to the German finance minister recommended a cautious approach towards Trump. "The EU should simply wait and see for now. It is well known that Trump is quick to suspend or withdraw his grand tariff threats," said Jens Suedekum to Reuters.
The US President must explain why he believes the EU is not complying with the existing trade agreement, said Suedekum, adding that it is not clear if there is a legal basis for the latest tariff threat. "Everything seems quite impulsive," the adviser said.
German car manufacturers call for immediate EU - US discussions
The German auto industry is, however, concerned and advocates for an urgent de-escalation of the tariff dispute between the US and the European Union, calling for immediate discussions between the two parties.
"The US-EU trade agreement must be respected by both parties," said Hildegard Müller, head of the VDA lobby group, in a statement quoted by Bloomberg. "This also means that the EU must finally ratify the conclusion of the agreement reached last summer."
T.D.