Germany to lose 26 trillion won if US car tariffs raised to 25%

"Germany to lose 26 trillion won if US car tariffs raised to 25%"

"Speculation also arises that Trump pulled out the tariff card after a 'Middle East war argument' with the German Chancellor"

An analysis suggests that if US President Donald Trump raises tariffs on automobiles from the European Union (EU) to 25% as announced, Germany, Europe's largest car-producing nation, could suffer losses of 15 billion euros (approximately 25.9 trillion won).

Moritz Schularick, director of Germany's Kiel Institute for the World Economy (IfW), made this estimate in an interview with Reuters on the 2nd (local time), asserting that production losses could increase to 30 billion euros (approximately 51.9 trillion won) in the long term.

IfW did not specify how these estimates were derived. The Volkswagen Group, which accounts for about 40% of German car production, has previously stated that current 15% car tariffs cost them 4 billion euros (approximately 6.9 trillion won) annually. Among major automakers, Mercedes-Benz and BMW have less tariff burden than Volkswagen due to higher local production in the US.

President Trump imposed a 25% tariff on EU-made cars in April last year but lowered it to 15% from August last year following an agreement with the EU. However, the previous day, he announced that the US would reimpose a 25% tariff on EU passenger cars and trucks starting next week, claiming that the EU was not complying with the trade agreement.

The European Parliament only approved the trade agreement in March, amidst public opinion that it was unfair and Trump's threat of additional tariffs stemming from the conflict over Danish Greenland. However, there are many doubts about the feasibility of the agreement's terms, such as the purchase of $750 billion (approximately 1,106 trillion won) worth of US energy over three years and an additional $600 billion (approximately 885 trillion won) in investment. In 2024, the EU's imports of US energy amounted to approximately $77 billion (approximately 114 trillion won).

In Germany, there is widespread speculation that President Trump pulled out the car tariff increase card as a warning to Chancellor Friedrich Merz, with whom he recently argued over the Middle East war.

Jens Südekum, an advisor to the Finance Minister, stated that "it is well known that Trump quickly suspends or withdraws grand tariff threats," adding that it is unclear which trade agreement was not upheld and if there is a legal basis for the tariff increase. German weekly Der Spiegel commented, "Why are the European and German economies facing such a predicament now? Merz should also ask himself that question."