European autos seemed locked in a commercial agreement with the United States that limited tariffs to 15%. However, with a skeptical Parliament and a US threat of 25%, the outcome for manufacturers remains uncertain.
European automakers may breathe a sigh of relief, but the American threat to their cars still looms. There is a delicate trade agreement in place meant to protect the automotive industry, but it remains fragile. If things go awry, Washington can quickly raise tariffs on European cars. While this may not impact the price of a Clio in France immediately, it heavily influences the future of major companies that design and manufacture European models.
This trade deal between the EU and the US automotive sector originates from the famous Turnberry agreement of 2025, setting a tariff ceiling. According to French customs, the US replaced old automobile surtaxes with a capped overall duty of 15%. The EU Council confirms that this reduction already applies to European cars and parts. Despite this, European regulations translating the agreement are still being discussed among Parliament and member states, causing tension among negotiators and automotive industry players.
As of July 2025, the Turnberry agreement sealed a political compromise on tariff rates between Washington and Brussels, affecting most European products. Cars and auto parts fall within this tariff framework. Previously, the US could activate section 232, allowing tariffs up to 25%. These specific duties targeted European cars, decreasing from 27.5% to 15%, retroactively effective from August 1, 2025. For a SUV priced at around €50,000, a 10-point difference translates to €5,000 in duties. Depending on manufacturers’ choices, this gap could affect the final price or profit margin.
Eurostat, the EU’s statistical office, highlights the significance of this agreement for the European auto industry. In 2024, the EU exported €165.2 billion worth of cars and imported €75.9 billion, resulting in a surplus of €89.3 billion. The US topped the list as the largest customer, purchasing €38.9 billion of European cars in 2024. Any sudden tariff increase would first impact European sedans and SUVs sold in the US, affecting factories and suppliers based in France, Germany, or Spain.
Despite progress made in trilogue discussions in May 2026 involving Parliament, member states, and the EU Commission, a final agreement is not secure. Challenges remain over safeguard clauses and demands for specific conditions to ensure EU concessions only apply when US tariffs are lifted. Failure to implement the agreement promptly could prompt the US to raise tariffs on European cars back to 25%, possibly affecting German premium manufacturers and European SUVs. The repercussions may involve price increases or reduced margins for these automakers.
The real risk lies in the financial balance of groups investing in European plants, with the workforce closely monitoring the 2028 deadline. If the agreement ends without proper security measures, a revival of US tariffs would have severe consequences for the industry.
