German auto makers scramble to work out tariff strategy

A number of German automobile manufacturers are adjusting their exports to the U.S. as they scramble to react to President Donald Trump's tariffs that place an additional 25 percent tax on all vehicle imports.

German car maker Volkswagen's Audi Auto group suspended the release of its vehicles - and parts - destined for the U.S. after the tariffs went into effect on April 2. Many owners will have to wait for their new vehicles, as they sit in U.S. customs while the company scrambles to respond to new tariffs of 25 percent.

Audi's Mid-size Q5 is a favourite among many American drivers, but since the Mexican-manufactured, German cars do not comply with the required 75 percent local content rule included in the US-Mexico-Canada Agreement on trade, they were subject to the 25 percent tax put on imports, just like vehicles coming from their European plants.

Responding to a request for comment from CGTN, Audi A.G said that "the Volkswagen Group, and thus also AUDI AG, is closely monitoring developments and will conduct a comprehensive internal assessment of the potential impacts, including on supply chains and our production network."

It went on to say "we share the assessment of most experts that U.S. tariffs and any counter-tariffs will have negative consequences for growth and prosperity in the U.S. and other economic areas. We continue to advocate for a rules-based exchange of goods, open markets and stable trade relations."

The Volkswagen Group has already invested a significant amount in North America, including committing to a $7 billion investment to expand EV manufacturing and R&D, and a $14 billion order for battery cells, which "help support thousands of well-paying jobs and contribute to prosperity and growth."

Yet Washington is hoping to increase jobs and prosperity by incentivising automakers to move or build new full production facilities in the U.S.

"This is now the consideration," Director of The Center for Automotive Research, Beatrix Keim, told CGTN. "This applies to all the manufacturers who are currently looking into building a plant that they didn't have before or extending their capacities. Is the volume in the U.S. big enough to perhaps start planning a plant in the US?"

It might also be something for British automaker Jaguar Land Rover (JLR) to consider, after it paused U.S. shipments for a month in reaction to the 25 percent additional tariffs on imported vehicles.

Netherlands-based auto giant Stellantis, which owns Chrysler, Jeep and Dodge, has also announced a temporary suspension in exports to the U.S., while luxury European brand Ferrari says it is planning to increase prices by up to 10 percent to offset tariff costs.

While the Trump administration has announced a 90-day tariff pause for some sectors, the auto industry is not among them, meaning a 25 percent additional tariff on all imported vehicles and auto parts remains, leaving significant challenges for both industry and consumer alike.