German carmakers in crosshairs of latest Trump tariff salvo

FRANKFURT, May 4 (Reuters) - Shares in German carmakers slid on Monday after U.S. President Donald Trump announced an increase in car import tariffs to 25% from the 15% levy previously agreed, dealing a fresh blow to the already beaten sector.

The pan-European automobiles and parts index .SXAP was down 2.3% as of 1046 GMT, while shares in Porsche P911_p.DE, BMW BMWG.DE, Mercedes-Benz MBGn.DE and Volkswagen VOWG_p.DE were all down 2% to 3%.

Trump said on Friday that the EU had not complied with a deal reached between Washington and Brussels last year that lowered duties on automotive imports to 15%. Implementation by the bloc has been slow and is not expected to be completed before June.

The tariff announcement, which Trump said would force European companies to move production to the U.S. more quickly, now upends that deal and has drawn sharp rebukes from European politicians and trade groups.

TARIFF HIKE WOULD BRING MORE PAIN TO GERMAN CARMAKERS

Additional duties would further weaken the position of Germany's premium car manufacturers, said Matthias Schmidt, European autos market analyst at Schmidt Automotive, noting that Audi and Porsche are among the most exposed companies due to the absence of U.S. production facilities.

He said he expected "2026 to be another year of profit warnings following this announcement."

Bernstein Research estimates that the additional 10 percentage points in tariffs would cost Germany's carmakers around 2.6 billion euros ($3.05 billion) in operating profit this year. Manufacturers would likely attempt to offset part of the burden with higher prices, it added.

Germany's export-dependent automotive sector has already been under strain from softening demand in China, slowing global growth as well as higher input and labour costs.

Volkswagen Group alone, which includes the Audi and Porsche brands, suffered a 4-billion-euro hit due to U.S. tariffs in 2025.

Sweden's Volvo Cars VOLCARb.ST, whose shares were 0.2% lower, said it was too early to comment on the possible implications of the tariff increase.

Rico Luman, senior economist at ING Research, noted that Trump has regularly used tariff threats as a negotiating tactic but has not always followed through and applied them.

"The EU adoption and legislative process is usually time-consuming. (The threatened tariff) could urge EU Parliament and Council to speed up with formal adoption though," he said.

($1 = 0.8532 euros)