May 7, 2026
All roads lead to tariffs when it comes to President Donald Trump. The White House is set to impose a 25% tariff on the European Union's auto sector, which will impact all cars and trucks manufactured in Europe for sale in US car lots.
Trump's pivot comes in response to his perceived non-compliance with the agreed-upon trade deal by the European Union (1), in addition to his taking great umbrage at German Chancellor Friedrich Merz's comments that the US was being humiliated by Iran (2). He took to Truth Social on May 1 to voice his displeasure.
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"I am pleased to announce that, based on the fact the European Union is not complying with our fully agreed to Trade Deal, next week I will be increasing Tariffs charged to the European Union for Cars and Trucks coming into the United States," Trump wrote (3).
Not intimidated, European Commission President Ursula von der Leyen shot back at Trump, stating they should stick to the terms of the agreement reached in Brussels last July (4). That same deal set the rate at 15%.
"A deal is a deal, and we have a deal. And the essence of this deal is prosperity, common rules and reliability," von der Leyen said in Armenia this week.
What the 25% tariff actually does
The global markets are familiar with tariffs since they're Trump's most-used tactic. However, the 25% levy applies to the vehicles brought into the United States from EU countries. That means if a car is imported at the wholesale value of $40,000, the tariff could add $10,000 before it even reaches a dealership lot.
According to the European Automobile Manufacturers Association (ACEA) (5), the main lobbying and standards group of the car industry in the EU, the US remains the second-largest market for new EU vehicle exports after the UK. American markets accounted for 18.4% of the EU export market in 2025, down from 21.9% in 2024 (6).
While some brands assemble cars in North America — including BMW in South Carolina, Mercedes-Benz in Alabama, Volkswagen in Tennessee and Volvo in South Carolina — a significant share of inventory would still be affected (7).
The immediate impact will likely show up on car lots, but the longer-term effects could include limited inventory, delayed shipments, or shifts in where automakers choose to assemble future vehicles.
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French President Emmanuel Macron criticized Trump's threats as a time waster. "Especially in the geopolitical period we are experiencing, allies like the United States of America and the European Union have much better things to do than to stir up threats of destabilization," Macron told reporters (8) on Tuesday. "For our businesses, our households, our populations, we should rather send a message of stability and confidence."
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What you can do now
Even if you're an American and you have no plans to buy a European car, it can still hit your wallet — hard. Higher prices on imported cars can push more buyers towards domestic brands, increasing demand and potentially driving up prices across the entire market, used cars included (9).
If you're in the market for a vehicle, you may see fewer deals, higher monthly payments and limited inventory, especially for more popular models. Brands affected include Volkswagen, BMW, Mercedes-Benz, Audi, Porsche, Jaguar, Land Rover, Aston Martin, Bentley, McLaren, Rolls-Royce, Lotus, Ferrari, Lamborghini, Maserati, Alfa Romeo, Fiat, Volvo and Polestar.
As prices rise, so do loan amounts, which can mean paying more interest over time. That's a direct hit to household budgets already stretched by inflation. Americans are also $1.68 trillion in debt due to auto loans, according to CNBC (10).
In the meantime, if you're considering a car purchase, it may be worth acting sooner rather than later to pick up that BMW or Jaguar before price increases take hold. Comparing domestic and non-EU alternatives, buying used or locking in financing early could help soften the blow.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Reuters (1); AP News (2),(8); X (3); Politico (4); European Automobile Manufacturers Association (5),(6); Manufacturing Today (7); Kelley Blue Book (9); CNBC (10)
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Brian Baker is an Associate Editor with Moneywise. He has been a media professional for over 20 years.
