Germany’s auto industry group (VDA) is urging calm after Donald Trump announced plans to raise U.S. tariffs on EU cars and trucks from 15% to 25%.

The VDA warns the move would hit European carmakers hard, adding major costs at an already difficult time and likely raising prices for U.S. consumers as well. Germany alone exported about $34.9 billion in cars and parts to the U.S. in 2024, so the stakes are high.

The tariff hike reverses earlier progress made in 2024 toward easing trade tensions. Trump says the increase is justified because the EU hasn’t fully complied with the trade deal, and he argues it will push European automakers to shift more production to U.S. factories (which would avoid tariffs).

The EU disputes this, saying it is meeting its commitments and is seeking clarification while preparing possible countermeasures.

Economic estimates suggest significant damage: Germany could lose up to €15 billion in output in the short term, potentially doubling over time. Other EU countries with strong auto sectors—like Italy, Slovakia, and Sweden—would also be affected.

Some analysts urge caution, noting Trump has previously walked back tariff threats. Meanwhile, unresolved issues in the trade deal—especially around steel and aluminum tariffs—continue to complicate relations.

Overall, the situation signals renewed trade tension between the U.S. and EU, with the auto industry caught in the middle and billions in transatlantic trade at risk.