Donald Trump’s $25 Billion Problem With Germany’s Carmakers

February 23, 2019, 6:00 PM UTC

As Volkswagen AG and other German automakers await President Donald Trump’s decision on whether to impose tariffs on vehicles imported into the U.S., new figures on Germany’s trade in cars will do little to ease the tension.

The home of Mercedes-Benz, BMW and Porsche generated a surplus of 22 billion euros ($25 billion) in automotive trade with U.S. last year, according to a breakdown of data from the Federal Statistics Office. That’s roughly in line with the previous two years, but down from the 27 billion-euro surplus in 2015.

Cars remained the most important export product for Europe’s largest economy, and the U.S. was the biggest market, importing 27.2 billion euros worth of German autos and parts in 2018. By comparison, Germany imported just 5.2 billion euros of equivalent U.S. goods.

If Trump decides on permanent tariffs of 25 percent, German car exports to the U.S. could fall by almost 50 percent in the long term, according to a study by the Munich-based Ifo economic research institute. Such tariffs would reduce Germany’s car exports by 7.7 percent, or the equivalent of 18.4 billion euros, Ifo Director Gabriel Felbermayr said.

Chancellor Angela Merkel gave an impassioned defense of the country’s car industry over the weekend, calling the Trump administration’s suggestion that European autos are a threat to U.S. security a “shock.” The European Union has vowed swift retaliation if Trump follows through on his threat and has prepared tariffs on a total of 20 billion euros in U.S. goods.