US President Donald Trump has threatened to sharply raise tariffs on cars and trucks imported from the European Union, reigniting trade tensions between Washington and Brussels and raising fresh uncertainty for global automakers. 

In a post on Truth Social, Trump said the United States would increase tariffs on European vehicles to 25% from next week, accusing the EU of failing to comply with an earlier trade agreement negotiated last year. 

“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. 

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He added that automakers manufacturing vehicles inside the US would not face tariffs, saying the move was aimed at accelerating investments and boosting domestic manufacturing jobs. 

What was the earlier US-EU trade deal? 

The trade arrangement between the US and the European Union, reached in 2025 after months of negotiations, was designed to prevent a broader transatlantic tariff war and stabilise supply chains already strained by inflation, energy shocks and geopolitical tensions. 

Under the agreement: 

• The US had capped tariffs on EU automobiles and auto parts at 15%, significantly lower than the 25% tariff rate imposed on some other trade partners. 
• The EU had agreed to expand purchases of American liquefied natural gas (LNG), defence equipment and certain agricultural products. 
• Both sides had also committed to discussions on industrial subsidies, electric vehicle supply chains and critical minerals. 
• The deal aimed to protect major European carmakers with strong US exposure, including companies such as Volkswagen Group, BMW and Mercedes-Benz Group. 

The agreement was widely viewed as a temporary compromise rather than a permanent settlement, with several contentious issues — including steel duties, green subsidies and EV incentives — left unresolved.

The EU had said it expected the bilateral deal would save European automakers about 500 million to 600 million euros ($585-700 million) a month.

The value of EU-US trade in goods and services amounted to 1.7 trillion euros ($2 trillion) in 2024, or an average of 4.6 billion euros a day, according to EU statistics agency Eurostat. 

Why Trump is escalating the dispute 

Trump’s latest comments suggest growing frustration within his administration over what it sees as insufficient compliance by the EU on market access and trade commitments. 

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While Trump did not specify which parts of the agreement the EU had allegedly violated, his administration has repeatedly criticised Europe over: 

• barriers to American agricultural exports, 
• digital regulations targeting US technology companies, 
• trade imbalances in automobiles, 
• and industrial policies favouring European manufacturers. 

The renewed tariff threat also aligns with Trump’s broader “America First” manufacturing strategy, which seeks to push global automakers to build more production capacity within the United States. 

In his statement, Trump claimed that more than $100 billion was currently being invested in new American automobile and truck manufacturing plants, calling it a record expansion in the sector. 

Impact on global automakers 

A jump from 15% to 25% tariffs could significantly raise costs for European carmakers exporting to the US, one of their largest overseas markets. 

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Luxury brands and premium vehicle manufacturers are expected to face the biggest pressure because many high-end models sold in the US are still imported from Europe. 

Analysts say the move could: 

• increase vehicle prices for American consumers, 
• disrupt transatlantic supply chains, 
• hurt European exports, 
• and potentially trigger retaliatory measures from the EU. 

Several automakers have already been expanding manufacturing operations in the US to reduce exposure to tariff risks. German manufacturers, in particular, have invested heavily in plants across southern American states over the past decade. 

Global trade tensions back in focus 

Trump’s latest tariff warning comes at a time when global trade relations are already under strain due to slowing economic growth, geopolitical conflicts and disputes over industrial subsidies in sectors such as electric vehicles, semiconductors and clean energy. 

The European Union has not yet officially responded to Trump’s announcement, but trade analysts expect Brussels to seek urgent consultations with Washington to prevent a wider escalation.

Published on: May 1, 2026 10:04 PM IST