Trump raises EU car tariffs to 25% as trade deal collapses

Trump announces 25% tariff on EU cars and trucks

The United States will impose a 25% tariff on cars and trucks imported from the European Union after Donald Trump accused Brussels of failing to honour a bilateral trade agreement signed less than a year ago. The announcement deepens an already volatile period in transatlantic trade relations and threatens fresh pressure on Europe's automotive sector, one of the continent's largest industries.

Trump made the announcement on his Truth Social platform, stating that EU carmakers would face no tariff if they relocated production to the United States. He offered no specific evidence for his claim that the EU had breached the agreement and declined to elaborate when questioned by reporters.

The tariff increase applies specifically to automotive imports and falls under a separate legal mechanism from the Liberation Day tariffs that the US Supreme Court ruled illegal earlier this year. The automotive tariffs are not affected by that ruling and remain in full legal force.

Read more about how business is responding to shifting US trade policy, or see our earlier coverage of the European market rally when Trump previously scrapped tariffs on eight nations.

What was the Turnberry trade deal?

The tariff hike follows an agreement reached at Trump's Turnberry golf resort in Scotland that set import levies on most European goods at 15%, offering relief from the 30% tariffs Trump had originally threatened under his Liberation Day package. In exchange, the EU committed to increasing investment in the United States and adjusting policies to benefit US exporters.

The European Parliament initially suspended approval of the deal in January over concerns about Trump's threats toward Greenland. It eventually ratified the agreement in March, but attached a clause allowing suspension if Washington undermined the deal's objectives, threatened member states' territorial integrity, or engaged in economic coercion.

European Commission and Parliament push back

The European Commission issued a firm response to Trump's announcement, insisting that the EU was implementing the Turnberry agreement in line with standard legislative practice and keeping the US administration informed throughout. It said it would keep all options open to protect EU interests if Washington took measures inconsistent with the joint statement.

Bernd Lange, chair of the European Parliament's international trade committee, described Trump's behaviour as unacceptable and rejected the claim that Brussels was failing to meet its obligations. Lange, a senior German MEP, said the Parliament was in the process of drafting the required legislation with a target of completing it in June.

Lange acknowledged that his committee had paused implementation of the deal earlier due to US pressure over Greenland and fallout from a US Supreme Court decision, but argued Washington had already repeatedly breached the agreement. He pointed to steel and aluminium products now carrying average tariffs of 26% as a direct violation.

Professor Simon Evenett, a trade expert at the IMD Business School, noted that a social media post does not constitute law and said Brussels would want to see the formal legal text before deciding on a retaliatory response. He suggested the development would be seen by many as confirmation that the current US administration cannot be relied upon to honour trade agreements.

EU automotive sector faces fresh pressure

Car manufacturing represents a significant share of Europe's broader economy, making the automotive sector a particularly sensitive target in any escalation of trade tensions. Germany and France, two of Europe's largest car-producing nations, had already rejected US proposals to adjust tariffs across a wider range of goods in the months leading up to this announcement.

Trump called on European carmakers to shift production to the United States, stating that domestic manufacturing would attract no tariff at all. He described the billions of dollars being invested in American car and truck plants as a record in the industry's history, though he offered no supporting data for this claim.

Steel and aluminium dispute fuels wider breakdown

The immediate trigger for this tariff escalation appears to be a dispute over steel and aluminium. Major European economies rejected US proposals to adjust tariffs on those goods, contributing to a broader deadlock in trade talks. Steel and aluminium products from the EU are currently subject to average tariffs of 26% under separate US trade measures.

The European Commission said talks had stalled over this dispute and that the EU had continued to implement the Turnberry deal through its normal legislative processes, which require the passage of domestic legislation before taking full effect. The Commission maintained that this procedural timeline was fully communicated to Washington.

Talks between the EU and US had already been under strain for several months. The European Parliament's addition of a suspension clause to the March ratification, triggered by Trump's Greenland statements, signalled that Brussels was preparing legal tools to respond to further US pressure. The automotive tariff announcement may now activate those discussions.

What this means for European car exporters and manufacturers

A 25% tariff on cars and trucks imported into the United States represents a substantial cost increase for European manufacturers who sell significant volumes into the American market. German brands in particular export large numbers of premium vehicles to the US, and a tariff at this level could erode margins considerably or lead to price increases for American consumers. The announcement also raises the prospect of a broader retaliatory response from the EU, which has previously used countermeasures against US goods during earlier episodes of trade conflict. Whether Brussels opts for a legal challenge, retaliatory tariffs, or renewed negotiations will depend on the formal scope of the measures once published. The underlying dispute over steel, aluminium, and the Turnberry agreement's ratification timeline suggests this is unlikely to be resolved quickly.