Introduction to the Crisis
Donald Trump brought the world to the edge in his second term as US President. The tariffs are only part of his agenda, but that alone has already triggered market feedback and threatens the basics of global trade. Export-dependent countries such as Germany and in particular its automotive industries are facing significant challenges.
Impact on Germany’s Automotive Industry
Around 3.4 million passenger vehicles were exported from Germany in 2024, with the United States being the largest internal market. The President of Germany’s IFO Economic Think Tank, Clemens Fuest, stated that higher taxes for automotive imports in the USA would affect "Germany’s most important export". Many European car manufacturers, including Germany’s Mercedes, have suspended or reduced the financial guidance of the entire year, which is partly due to Trump’s trade tariffs.
Storage Cars
An unusual trend has occurred in the global auto industry since Donald Trump unveiled his plans for an imported car: more vehicles are produced and shipped to the USA than before. This is a strategy to "stock up" and exceed higher tariffs for at least a few months. Car manufacturers are trying to import as many vehicles as possible before the tariffs occur, leading to a "short-term countercyclic production tower".
Reason for Hope from London
The US President has also shown a certain level of flexibility in his attempts to coordinate trade agreements. The latest examples were preliminary agreements with Great Britain and China, in which he lowered the tariffs for certain periods. The British government in London was able to reduce the tariffs by 10% in up to 100,000 British cars.
Business Car
Trump’s irregular trade and economic policy is difficult to cope with, and the experts questioned are finding it challenging to adapt. "Flexibility is the key," said one expert, when confronted with Trump’s guidelines, and added that the constant uncertainty "is poison for manufacturers and suppliers who have to plan and coordinate long-term and complex supply chains".
Global Division of Labor at Risk
However, it is not a silver bullet in the United States because car production in America still requires imported parts, and this also applies to American companies. Many components in "American" cars come from abroad, which means that the experts ask whether the concept of global industrial "labor" is not understood by the Trump administration.
Explore New Markets
In view of the upheaval caused by Trump’s trade policy, German car manufacturers need new strategies. One expert advises a "waiting and lake" approach that "has not yet reacted". Since the situation is more unsure than ever, he suggested focusing on future investments in Asia. The most important consequence is a stronger geographical diversification of production, and companies should expand their production in more countries in such a way that they are less dependent on the trade rules of a nation.
