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Europe’s automakers were praying for an end to the Iran war to signal an end to negative factors undermining sales. Instead, President Trump threatened to raise tariffs again.
President Trump’s threat, to raise tariffs on automobiles from the European Union to 25% from 15%, turns out to be exasperation at the snail’s pace of EU bureaucrats taking their own sweet time to consider the U.S./EU trade deal negotiated in August last year.
The European Automobile Manufacturers Association (ACEA) wants talks to conclude as quickly as possible.
“ACEA calls on the European Parliament and the Council to find common ground and bring the trilogue (sic) negotiations to a swift and successful conclusion,” ACEA said in a statement.
The Council of Ministers represents the national governments of the 27 EU member states.
“The United States remains the second-largest market for new EU vehicle exports after the United Kingdom. In value terms, it accounted for 18.4% of the EU export market in 2025,” ACEA said.
The repercussions from the U.S./Iran war continue to spook European automotive investors because of its damaging impact on supply chains in general and oil and gas prices in particular. One early positive was the theoretical boost to electric vehicle sales, as buyers forsook combustion vehicles suffering from eye-watering prices at the pump.
Fitch Ratings, in a report entitled “Prolonged Iran Crisis to Have Broad Cross-Sector Consequences, said the conflict is unlikely to “materially alter the prevailing electrification narrative”.
“Electric vehicle sales in Europe continue to rise and reached 18% in February; however, this remains below the levels anticipated by many industry experts and market participants five to six years ago. Adoption remains constrained by practical barriers, including range anxiety, insufficient public charging infrastructure, charging times and the limited suitability of existing models, most of which offer ranges of 500 km to 600 km (312 miles to 375 miles),” Fitch Ratings said.
According to ACEA, EV’s achieved a market share of 19.4% in the first quarter of 2026.
GlobalData expects overall car and SUV sales in Western Europe to stagnate in 2026 at just under 12 million. Manufacturing capacity is probably still geared to satisfy pre-Covid pandemic sales of closer to 16 million. This explains why the German auto sector, long the European powerhouse, shed 50,000 jobs in 2025, and analysts predict about 200,000 more jobs will go by 2030. As cheaper and often higher-quality sales from China gain momentum in this stagnant market, investors can see the writing on the wall.
Iran United States volatile crisis and American Iranian war risk as US military war tension in the middle east as an imminent threat concept as a security armed confrontation or economic sanctions with 3D illustration elements.
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The German automotive industry’s business climate continues to deteriorate, the IFO Institute said.
“The Iran crisis is placing an additional strain on an already weakened automotive industry,” said the IFO’s industry expert Anita Woelfl in a monthly report.
Material shortages are becoming apparent.
“The Iran crisis is affecting the production and supply of helium, for example, an inert gas that is important both directly and indirectly for automotive production. Helium is used in chip production, for airbags, in metalworking, and to detect leaks in batteries,” Woelfl said.
This helps to explain the vigorous reaction to President Trump’s renewed tariff threat. The Kiel Institute for the World Economy said the new tariffs could cost Germany the equivalent of $17.6 billion in lost output, rising to $35 billion over the longer term. Italy, Slovakia and Sweden would also likely suffer big losses.
But the initial reaction seems to have been overdone.
Investment researcher Bernstein said the threat might be defused by fast-tracking by the EU of the elimination of tariffs on U.S. industrial goods.
“It appears that President Trump is angry that the removal of tariffs on U.S. industrial goods that was agreed last September after being proposed in July 2025 has yet to pass through the EU’s lengthy legislative process,” Bernstein said in a report.
Investment bank UBS expects a successful resolution.
“We think that in the light of the urgency, the EU’s trilogue process could lead to final approval of the package in the coming weeks,” UBS said in a report.
But just in case, UBS is making pre-emptive calculations.
“In the meantime, we think some near-term reduction of imports is likely until the situation is resolved (if at all), potentially affecting Q2 numbers.”
“As a reminder, the German (manufacturers) are most affected by import tariffs on EU-made cars. Porsche’s exposure is the highest, followed by Mercedes-Benz, BMW and Volkswagen. Volvo Cars is also negatively affected,” according to UBS.
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