US President Donald Trump announced on May 1 that he plans to raise tariffs on cars and trucks imported from the European Union to 25% next week, a move that could impact the fragile global economy. In a social media post, Trump stated that the EU “is not complying with our fully agreed Trade Deal,” but did not provide specifics.
When asked about the tariff increase, Trump claimed the EU was not following the trade framework established last year. He believes the higher tariffs will encourage faster relocation of factory production to the US.
Last July, Trump and European Commission President Ursula von der Leyen agreed to a trade deal with a 15% tariff ceiling on most goods. However, a recent Supreme Court ruling invalidated the basis for that tax, leaving his administration to impose a temporary 10% tax while investigating trade imbalances and national security.
These tariffs are being introduced amidst rising inflation and the impact of the Iran war on the global economy, which has driven oil and gas prices higher. As the November midterm elections approach, Trump faces political pressure amid inflation that reached 3.3% in March, higher than when he took office. A poll by The Associated Press-NORC Center for Public Affairs Research shows only 30% of US adults approve of Trump’s handling of the economy.
Europe wants to maintain the trade agreement of last year
The European Parliament is expected to finalise last year’s trade agreement next month. The EU has stated it is adhering to “standard legislative practice” and warned that it will protect its interests if the US takes inconsistent measures. The Trump administration has not addressed inquiries about the recent tariff increase or Trump’s claims of violation.
Trump’s relationship with Europe has been fraught, with prior threats to take control of Greenland and criticisms of NATO allies. Bernd Lange, chair of the European Parliament’s trade committee, called Trump’s tariff hike on automobiles “unacceptable,” asserting that the Trump administration has repeatedly broken its commitments on import taxes on steel and aluminium.
Jennifer Safavian, CEO of Autos Drive America, warned that the tariff increase could undermine progress in opening EU markets and growing the US auto industry. The status of the 2025 deal was questioned after a Supreme Court ruling limited the president’s authority to impose tariffs on EU goods.
The Trump administration has launched trade investigations under Section 301 of the Trade Act of 1974, examining claims of forced labour and of overproduction harming American manufacturers. Potential new tariffs could jeopardise the EU agreement, although European Commissioner Maroš Šefčovič noted that relations with the US are improving.
Scott Lincicome from the Cato Institute suggested that Trump may use Section 232 of the Trade Expansion Act to impose additional tariffs. Although Trump initially set 25% tariffs on foreign autos in March 2025, those were later reduced under the trade framework with the EU.
The EU expected the bilateral deal to save European automakers approximately €500 million to €600 million monthly. In 2024, the value of EU-US trade in goods and services reached €1.7 trillion, averaging €4.6 billion daily, according to Eurostat.
This article used information from The Associated Press.
