Alongside other premium German manufacturers, Mercedes will be strongly affected by the 15% import tariff imposed on cars entering the U.S. market.
Although the European Commission had taken a much tougher stance a few months ago and stated that it would not submit to Donald Trump’s demands, it eventually gave in and avoided an economic conflict with the USA.
The European Commission accepted a general customs tariff of 15% for any goods imported from the USA, including automobiles. Voices within the EC believe that if the European Union had not accepted this compromise, Trump could have unilaterally imposed much higher tariffs. At one point, there was even talk of 100%.
The bill will now be paid by German manufacturers, as it is unlikely they will raise prices by 15% to cover the new tariff. This trade agreement comes at a very bad time for the German luxury car industry, as profit margins for Porsche, BMW, Audi, and Mercedes have substantially decreased.
Hildegard Müller, president of the VDA (German Automotive Industry Association), believes these tariffs will further worsen the difficult situation facing the German automotive industry.
“It is, in principle, a good thing that European Commission President Ursula von der Leyen and U.S. President Donald Trump have announced a framework agreement and thus managed to avoid further escalation of the trade conflict. (…) However, it is also clear that the 15% U.S. customs tariff, including for automotive products, will cost German automotive companies billions annually and burden them during a time of transformation. (…) It is of major importance that the auto supply chains, distorted and restricted by the tariff dispute, start functioning again. All the more necessary, among other things, is a solution for the previously interconnected North American region – that is, the USA, Mexico, and Canada – within the USMCA agreement. This is particularly important for the supplier industry.”
At first glance, Mercedes and BMW are not as heavily affected as Audi or Porsche, since both manufacturers produce many SUVs at their plants in the USA.
BMW manufactures the X3, X4, X5, X6, and X7 at its plant in Spartanburg, South Carolina, while Mercedes produces the GLE, GLE Coupe, GLS, EQE SUV, EQS SUV, and Mercedes-Maybach EQS SUV at its plant in Tuscaloosa, Alabama. Mercedes also operates a battery plant there for its electric models, although the raw materials are imported from China.
However, Porsche and Audi do not have factories in the USA. Audi and BMW have plants in Mexico, but products imported from there will also be subject to customs duties.
For Mercedes, it would be almost impossible to raise the price of, for example, the E-Class sedan imported from Europe to the USA, as it would become more expensive than the GLE, which is produced locally – and no one in the USA, the land of SUVs, would buy a sedan that costs more than an equivalent SUV.
However, Mercedes could try to assemble the mid-size GLC SUV in the USA, as it is its best-selling model globally.
Now that it is outside the EU, the United Kingdom has benefited from Trump’s leniency and faces tariffs of only 10%.