These newly introduced tariffs are a major cause for concern for Volkswagen, as it is one of the import-dependent carmakers selling in the US.
With US President Trump unveiling new tariffs every few weeks, world leaders and businesses alike are having sleepless nights as they try to find ways to minimize the damage these tariffs will do to the global economy. With Trump imposing a 25% auto tariff, Volkswagen has decided to impose an ‘import fee’ on the affected vehicles.
The Wall Street Journal reported that the automaker has paused rail shipments of vehicles from Mexico for the time being and has decided to hold port cars arriving by ship from Europe. In a memo to its retailers and dealers, Volkswagen said more details regarding the pricing strategies for tariff-affected cars would be provided around mid-April. The plans to allocate these vehicles to stores would come into effect by the end of the month.
The German carmaker has dubbed this as a temporary move, promising to work with logistics companies ‘to optimize vehicle movement once the tariff situation stabilizes.’ These newly introduced tariffs are a major cause for concern for Volkswagen, as it is one of the import-dependent carmakers selling in the US. Volkswagen said that it wants to be transparent while navigating these uncertain times, having previously explained that the Trump tariffs and any other reciprocal tariffs would adversely affect growth in the US and other regions.
According to a Reuters analysis of tariff codes included in a federal register notice, the 25% auto tariffs will cover over $460 billion worth of imported vehicles auto parts annually. A follow-up to the White House announcement last week, the auto tariffs will be implemented from May 03, with nearly 150 auto parts categories being charged with additional import duties.
Reuters reported that engines, transmissions, lithium-ion batteries and other major components are all included in the tariff list, along with the less expensive parts such as tyres, shock absorbers, spark plug wires and brake hoses. Automotive computer products, like laptop and desktop computers and disk drives, were also included under the four-digit tariff code and the 2024 US Census Bureau data valued these imports at $138.5 billion.
The parts list and the schedule of the May 3 taxes on those imports were revealed just before Trump announced the baseline 10% duty on all U.S. imports. Many countries were quick to impose higher reciprocal duties to offset non-tariff trade obstacles.
While the auto sector is cautioning the Oval Office of serious recessionary trends in the industry due to these tariffs, the administration seems to be defending its stance with more aggression. The White House instructed the Commerce Department to set up a procedure within 90 days for domestic producers to propose that other parts imports be targeted, which could lead to the addition of more parts to the tariff list.
It appears as though despite the pleas and warnings; the Trump administration is determined to move ahead with its protectionism. In March, a group representing Volkswagen, General Motors, Toyota and other prominent automakers had warned the US President that these 25% tariffs would hurt US customers. As a result of these additional duties, customers will have to bear the surge in costs, while also lowering the number of vehicles sold in the country and bringing down US auto exports.
There was some speculation about lower tariff rates or exemptions after short-term policy changes. However, these hopes were shattered with the 25% imposition, and European carmakers are now contemplating how much of a price rise is required to counter these tariffs. Europe‘s export-reliant automakers, particularly Germany‘s largest automakers, are particularly vulnerable and have limited alternatives for short-term responses beyond price hikes and lower discounts.
While companies, not just within the automobile sector, are promising to bring more investment and manufacturing to the US to avoid tariffs, the truth remains that these tariff wars are bound to drag down economic growth across countries