Trump Sparks Fears Among European Car Makers With 50% Tariff Threat

US President Donald Trump has agreed to delay imposing a 50% tariff on European Union (EU) goods until July 9, following a phone call with European Commission President Ursula von der Leyen.

The decision presents a brief but crucial opportunity for negotiations, as both sides aim to de-escalate a growing transatlantic trade standoff that has shaken European markets. The EU plans to impose approximately €100 billion in additional tariffs on US goods if trade talks fail, Bloomberg reported.

"Europe is ready to advance talks swiftly and decisively," von der Leyen said, noting the importance of the following weeks. "To reach a good deal, we would need the time until July 9."

French President Emmanuel Macron called for a return to "the lowest possible tariffs that will allow for fruitful exchanges." He noted that the dialogue between Trump and von der Leyen had opened the door for continued engagement.

Ireland's foreign minister, Simon Harris, added that these contacts present the opportunity for negotiations to move forward." Tariffs of 25% could reduce Ireland's GDP by 3.7% over seven years, the Economic and Social Research Institute said.

Markets responded positively, as the EuroStoxx 50 index gained 2% by Tuesday, erasing last week’s decline.

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Trump Ramps Up Tariffs, Expresses Frustration

The decision to postpone tariffs followed a confusing stretch of signals from Washington. Trump started with a 10% tariff announcement in early April. He then ramped it up to 50% last week with a start date of June 1.

The EU "has been very difficult to deal with," Trump wrote on Truth Social. "Our discussions with them are going nowhere!"

The sudden change rattled the European markets. Multinational firms like Mercedes-Benz MBGAF, Stellantis STLA, and Mattel MAT had already withdrawn their guidance, citing policy uncertainty.

"Stocks and other risky assets are down as #Trump threatens a 50% tariff on EU goods as early as June," Jeroen Blokland, founder of the Netherlands-based Blokland Smart Multi-Asset Fund, wrote on X, "While Trump’s behavior is nothing short of erratic, it’s not difficult to imagine why dealing with the EU is undoable."

Blokland accused the EU's "non-elected leaders" of being "disentangled from reality" and captured by an "an ideologist perspective" that thinks its "way of doing business is superior."

Trump's Tariffs Target Vital EU Export Sectors

Despite Blokland’s assessment, the EU remains dependent on US markets. In 2024, the US was the EU's top export destination, accounting for over €530 billion in goods, or 20.6% of total exports.

The proposed tariffs target several of the EU's most vital export sectors. Road vehicles alone contributed €51 billion to the 2024 trade figure, making the auto sector especially vulnerable.

Machinery, chemicals, vehicles, and pharmaceuticals—key pillars of the European industrial base—would be the most severely impacted. Pharmaceutical exports—worth nearly €120 billion—are also at risk. Ireland is particularly exposed due to its concentration of multinational pharmaceutical companies.

Already subject to 25% US import duties on steel, aluminum, and cars, the EU's manufacturing sector now faces the possibility of an even greater squeeze. A 50% tariff could shave 0.5% off the EU's GDP, according to Maria Demertzis of the Conference Board think tank. She cited European Commission modeling.

US Tariffs Starting to Hurt European Industries

The escalating US trade policy has started to impact European industries.

On Monday, Volvo Cars VLVLY announced it would cut 3,000 white-collar jobs, roughly 15% of its office workforce, as part of a cost-cutting effort. The layoffs follow a broader €1.9 billion restructuring plan unveiled in April amid slowing electric vehicle demand, high costs, and deepening trade uncertainty.

Volvo CEO Håkan Samuelsson confirmed the decision in an interview with Reuters. "It's white collar in almost all areas, including R&D, communication, human resources," he said. "So it's everywhere, and it's a considerable reduction."

The company's CFO, Fredrik Hansson, added that while most cuts would affect the company's Gothenburg headquarters, all departments would be impacted.

"No stone is left unturned," he said.

With much of Volvo's production based in Europe and China, the firm is more exposed to the fallout from US tariffs than many of its peers. The company has already warned that exporting its most affordable cars to the US could become untenable under the proposed measures.

EU-US Trade Tensions Underscore Deeper Divide

The challenge of resolving the EU-US differences over trade policy has underscored deeper tensions within the alliance. The EU and the US differ over how to resolve the war in Ukraine, with Trump seeking a swift, peaceful end to the conflict.

Trump has repeatedly called climate change a “hoax” or a “scam,” while the EU has stayed committed to its energy transition. On a deeper economic and political level, the Trump administration is far more pragmatic than the "excessively ideological" EU.

The EU's "unprecedented amounts of legislation and bureaucracy," and "deliberate internal and external (trade) barriers," make "negotiations extremely hard," for the EU, Blokland wrote. "Another poor performance from Europe!"

The US is prioritizing the Americas and Asia in an increasingly "multipolar world," according to Glenn Diesen, a professor at the University of South-Eastern Norway, who wrote on X. The "relevance of Europe" continues to plummet in the eyes of the Americans, he added.

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