Volkswagen, the German automotive giant, just announced a crippling $1.5 billion loss in the first half of 2025. This massive blow was the result of U.S. tariffs imposed during Trump’s presidency. Beginning a 25% tariff on imported vehicles on April 2, the company’s burden deepened. Sales and operations have been devastated. The fallout was a 16% drop in North American sales for Volkswagen.
The implications of these tariffs reach farther than just Volkswagen. Stellantis, parent company of Jeep, projects $2.7 billion in losses over the interval. This figure alone should highlight the enormous impact of U.S. trade policies on the auto industry. Stellantis cautions that at the current tariff rate could extend into the second half of 2025 under a worst-case scenario. They’re still hopeful and believe there’s a chance that it could be dropped down to 10%.
As tensions increase, President Trump just fired a serious shot across the bow. Furthermore, he’ll increase tariffs on goods imported from the EU to 30% if a trade deal is not completed by August 1. The ongoing uncertainty surrounding tariffs has created a challenging environment for car manufacturers, with Tesla acknowledging a “sustained uncertain macroeconomic environment resulting from shifting tariffs.”
In response to the tariffs, the White House has defended the measures as necessary to “protect and strengthen the U.S. automotive sector.” Critics have pointed out that the focus of these tariffs mostly just increases costs for automakers and consumers. The overall U.S. inflation rate is now 2.7%. In the meantime, new and used car prices have both spiked, with June’s new car prices up 0.6% versus a year ago.
So come ready to learn and engage! That kind of relief has been somewhat mitigated by a recent U.S.-Japan trade agreement that slashed auto tariffs from 25% down to 15%. The prospect for such an agreement with the European Union now is unclear. A favorable deal might set tariffs on European goods at 15%, giving some economic breathing room to manufacturers such as Volkswagen and Stellantis.
Volkswagen’s management expressed concern regarding future tariff developments, stating, “There is high uncertainty about further developments with regard to the tariffs, their impact and any reciprocal effects.”
