After I wrote in the first post about the consequences of the announced and effective tariffs of the USA... there are now some concrete answers from the affected countries, especially from Canada.
It's hard to keep up with all the news 👀
In this post, I go into more detail about the possible consequences for the EU, especially for the automotive sector.
"1st post from this morning" can be read again here: https://getqu.in/oj1JRH/
Trump's new tariffs: Recap
Since February 1, 2025, the US government and Donald Trump have imposed new import tariffs on Mexico, Canada and China:
- 25% on imports from Mexico and Canada
- 10% on imports from China
- Trump's decrees also contain a passage stating that the tariffs could be increased or extended if the countries respond with retaliatory measures [1].
Canada: A tough counterattack
- Canada has already reported on countermeasures in the form of three levels of escalation [2]:
- 1️⃣ Targeted punitive tariffs on US products coming from Republican states (e.g. orange juice, whiskey, ketchup, peanut butter and motorcycles).
- 2️⃣ Tariffs on steel products and machine parts from the USA.
- 3️⃣ Escalation: Stop exports of oil, gas and electricity to the USA
However, this last step in particular would be a double-edged sword, as Canada is heavily dependent on energy cooperation with the USA.
Now it's getting concrete:
Canada's Prime Minister Justin Trudeau announced at a press conference in the evening Canadian time that tariffs of 25 percent will also be introduced on US goods from Tuesday next week 🔄 [2].
The tariffs planned by Canada are intended for US goods with a total value of 155 billion dollars.
The Canadian government is also considering measures in other areas, such as trade in critical minerals.
Further effects on companies:
- Canadian exports to the USA will become more expensive and therefore less competitive.
Particularly affected: (automotive, energy, raw materials, agriculture)
German car manufacturers used Canada as a production and export location
- Volkswagen $VOW3 (+0,16 %) , BMW $BMW (+0,08 %) , Mercedes Benz $MBG (+0,46 %)
- e.g. VW is planning a battery factory in Canada to supply its US plants, Trudeau's government has lured the billion-euro project with high subsidies [2]. Trump's tariffs could make this billion-euro project unprofitable 🤡
Canadian oil and gas producers sell large quantities to the US, higher tariffs could make exports less attractive and squeeze profits.
Fertilizer producers are heavily dependent on US exports, higher costs and a competitive disadvantage compared to US competitors represent a potential risk.
Mexico: The USA punishes its most important trading partner
Counter-tariffs possible: President Claudia Sheinbaum has announced corresponding measures and instructed her Secretary of Commerce to implement a plan that considers counter-tariffs [2]. - We can be curious.
Mexico's dependence on the USA:
- According to economists, the tariff policy is likely to harm both economies through higher inflation and job losses.
- 80% of Mexican exports go to the USA, no other country exports more to the US.
- Millions of jobs and thousands of companies depend on the US market 💀
Trump uses tariffs as political leverage:
- He wants to force Mexico to take a tougher stance against illegal migration and drug cartels.
- He also accuses China of circumventing tariffs by allowing Chinese companies to export from Mexico to the USA.
Impact on European companies: (again the car manufacturers 👀)
- Almost all manufacturers and many suppliers use Mexico as a cheap production location and serve the US market from there
- VW, Audi and BMW have their own factories in the country, while Mercedes Benz produces in a joint plant with Nissan.
- With an additional surcharge, it hardly makes sense to send cars from Mexico to the USA.
- In response, manufacturers are expected to relocate at least part of their production from Mexico to the USA (at high cost, of course), where VW, BMW and Mercedes also have plants.
China: a further burden for an ailing economy
- China strongly criticized the punitive tariffs [2].
- Complaint to the World Trade Organization (WTO): China sees the tariffs as unfair and wants to take legal action against them.
Consequences for China:
- US tariffs make Chinese products more expensive in the USA.
- The already weakening economy will be further burdened.
Indirect effects on Europe:
Chinese manufacturers such as BYD $1211 (+5,43 %) could be forced to develop alternative markets and push even harder into Europe.
- The result: more competition for German car manufacturers and possible price wars.
- VW & Co. are already struggling with overcapacity in Germany.
Furthermore:
- Foxconn $2354 an important Apple supplier with production in China and Mexico
- Punitive tariffs could make it necessary to relocate production.
Is the EU facing the same fate?
Trump has already indicated that the EU must also fear tariffs.
- His main argument: the EU has treated the USA unfairly in trade.
Possible measures:
- Tariffs on... who would have thought... the automotive industry and also other exports from the EU.
- Car exports to the USA could become increasingly unprofitable -> relocating production to the USA could ultimately be the only solution.
- A new edition of the trade conflict from Trump's first term in office (2017-2021).
Possible reaction of the EU:
- If Trump escalates again, the EU could also take retaliatory measures so far I haven't heard anything concrete 😴
Conclusion: Trade war 2.0?
Trump is once again focusing on confrontation and using tariffs as economic and political leverage. The countries affected are fighting back, which increases the risk of a global trade war.
The consequences are far-reaching:
USA: Higher prices for consumers, relocation of production to the domestic market possible.
China: Further economic pressure, stronger focus on Europe as a sales market.
Mexico & Canada: Massive burden on the economy & industry, relocation of production conceivable.
Europe: German car manufacturers under pressure, possible US tariffs on European products.
I'm in the mood... Thanks for reading, I've had enough now! 🤝
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Main sources:
[1] https://www.tagesschau.de/ausland/amerika/usa-trump-strafzoelle-100.html
[2] https://de.finance.yahoo.com/nachrichten/roundup-kanada-mexiko-china-kontern-083517258.html
