Tariff war: Volkswagen, Mercedes hit back with brutal price hikes

European carmakers have started raising prices and shifting production to the US to avoid President Donald Trump’s new auto tariffs.

Volkswagen has added import fees to its vehicle prices in the US, reacting to the 25% tariff on foreign cars.

Mercedes-Benz and Volvo plan to expand local production in the US to avoid the heavy import duties.

German automakers are among the hardest hit by the tariffs, which will increase costs and disrupt supply chains.

Luxury brands like Mercedes, BMW, and Porsche continue to benefit from strong demand for SUVs in the US market.

The US imported $24.8 billion worth of cars from Germany last year, leading among European Union nations.

Hildegard Müller, head of Germany’s auto lobby, described the tariffs as a “turning point” that will hurt both sides.

She warned that US consumers will suffer from rising car prices and fewer options in the market.

The tariffs have already affected the industry, as buyers rush to close deals before prices increase.

German car stocks fell on Thursday, with Volkswagen and Mercedes losing over 3%, while BMW dropped by 4.4%.

Volkswagen informed US dealers about the new import fees and temporarily halted rail shipments from Mexico.

Mercedes may move production of a model to its US factory in Alabama to counter the tariff impact.

The company is also considering pulling smaller, cheaper models from the US market due to high costs.

Germany’s outgoing economy minister, Robert Habeck, called for talks but warned of a tough response if no compromise is reached.

He cautioned that the tariffs could trigger a global economic downturn and hurt multiple industries.

Volkswagen manufactures some models in Tennessee but still imports several vehicles from Europe and Mexico.

BMW relies heavily on imports despite having a large plant in South Carolina producing 400,000 vehicles annually.

Mercedes continues to assemble SUVs in Alabama but still imports key parts like engines and gearboxes from Europe.

Italy’s Ferrari and the UK’s luxury brands also plan to raise US prices, passing tariff costs to consumers.

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