U.S. President Donald Trump fired the latest shot in this trade war escalation, threatening to impose tariffs on European car imports. This decision will have far-reaching effects within the automotive sector, which is already disproportionately susceptible to trade tariffs. In early April, Trump announced a 25% tariff on all foreign-made vehicles and foreign-built auto parts. This move heap even more obstacles on European automakers. He also imposed steel and aluminum tariffs, increasing most countries’ tariff rate to 50%. This action, together with the regulatory environment in general, created tremendous headwinds for the industry.
Volvo Cars seems especially vulnerable to these tariffs. Second-quarter operating profit at the Swedish company fell almost 90% from a year earlier. This decrease is the most recent indicator of the financial pressure that the tariffs have exacerbated. The company will announce its financial results for the first half of 2025 on July 29. Trade analysts will be watching closely to see how these trade policy moves have really affected the numbers of the past. Volvo Cars’ CEO Håkan Samuelsson is walking the walk in this highly competitive and difficult global automotive market. He announced plans to put the popular XC60 sports utility vehicle on the production line at the company’s plant in Charleston, S.C.
Renault, which is significantly important in the European automotive market, suffered losses from the tariffs. The company recently slashed its guidance for 2025 and announced that Duncan Minto would be replacing Ari Yaffer as its interim chief executive officer. Renault’s second-quarter operating profit, excluding items related to a change in scope, dropped to 2.9 billion Swedish kronor (about $302.3 million). That’s why Renault doesn’t have a direct play in the U.S. market. Although this absence would reduce some harms, its removal underscores deeper issues in the industry.
Members Volkswagen AG, Europe’s biggest carmaker, will release its half-year results on Friday. Industry insiders are watching the earnings statements with hawkish eyes. They’re looking to understand how the effects of Trump’s trade policies are still playing out on European automakers. The automotive sector is especially vulnerable given its deep levels of globalization and the dependence on manufacturing activities in North America. Consequently, most businesses are faced with significant market uncertainty caused by tariffs.
In fact, President Trump has even threatened to raise duties on EU auto imports to 30%. This increase will go into effect on August 1, on top of already imposed tariffs. These measures would likely make the difficult conditions that European car makers are already experiencing even more severe! This is particularly troubling given the sector’s decreased profit margins and recent massive layoffs.
That uncertainty has many investors and analysts on edge about the future. Rising tariffs and the trade war with China are other imminent dangers. They’re sure to keep making waves and further influence the automotive landscape in Europe and around the globe.