Trump's Auto Tariffs Already Cost Mercedes $420 Million

The ongoing trade dispute between the U.S. and Europe over automobile tariffs continues to create uncertainty for vehicle manufacturers. Speaking to Bloomberg, Mercedes-Benz has urged the Trump administration and the European Union to strike a trade deal and reduce tariffs on directly imported vehicles. Currently, European automakers face a steep 27.5% tariff, though according to Reuters, the U.S. agreed on July 27th to reduce this to 15% after the EU cut import duties on American goods.

Tariff Deadlock Hurts European Automakers

In a Bloomberg interview, Mercedes-Benz Group AG Chief Technology Officer Markus Schäfer warned that without a permanent resolution, automakers risk further price increases or production shifts, potentially affecting European jobs and industrial output. "The situation has a serious impact," Schäfer said. "We hope that both parties find a resolution over the coming weeks. It's seriously needed."

Mercedes-Benz faced significant headwinds in the second quarter of 2025 beyond typical challenges from slowing global demand. The German luxury manufacturer reported worldwide sales of 453,700 vehicles, down 9% year-over-year. In the U.S., its second-largest market, the decline was steeper at 12%.

The tariff dispute alone cost Mercedes-Benz $420 million in quarterly earnings, according to the company. The additional duties have forced higher sticker prices while squeezing profit margins—a particular challenge as competitors like BMW benefit from local manufacturing advantages.

Mercedes-Benz joins other automakers caught between Trump tariffs and China's export restrictions on rare earth materials. Schäfer acknowledged challenges from Beijing's restrictions on minerals essential for electric motors and advanced components. China, the world's leading processor of these materials, has recently intensified export controls.

"With the help of our Chinese suppliers, we have managed to avoid disruptions thanks to buffer stocks and alternative suppliers," he said, "but we cannot guarantee this forever."

EU Moves to Eliminate U.S. Tariffs

The EU has begun eliminating duties on U.S. industrial goods while granting "preferential market access" to products including seafood and agricultural materials. In return, the U.S. will reduce EU auto tariffs from 27.5% to 15%.

In February 2025, President Trump declared that the European Union was "formed to screw the United States," escalating his rhetoric against the 27-nation bloc. He linked the proposed trade measures to addressing the U.S. goods trade deficit with the EU, which reached $235 billion in 2024 according to U.S. Census Bureau data.