Germany’s automotive industry has become one of the country’s segments hardest hit by US tariffs, according to a report from the Cologne Institute for Economic Research examined by Kallanish.
The study finds that German exports of motor vehicles and parts, machinery and chemical products are particularly impacted. Together these operations account for more than two-fifths of German exports to the US and have been an outsized contributor to the overall decline in overseas shipments.
“Combined, these three sectors alone have dragged Germany’s exports to the US down by over 5.2 percentage points compared to the previous year, representing more than two-thirds of the overall decline in German exports to the US,” the report notes.
The relatively high tariff burden on motor vehicles and parts before the tariff agreement between the EU and US in August 2025 likely contributed significantly to the sharp drop of 14% in German automotive exports to the US compared with the previous year. German machinery exports to the US are partially subject to a substantially higher tariff rate of 50%, which applies to steel, aluminium and related products.
“Accordingly, German machinery exports to the US fell by 9.5% in the first three quarters of 2025. For metals, stronger front-loading effects in the first quarter explain the initial increase in exports, while subsequent quarters saw declines,” the economists’ document observes. “In key sectors, German exports to the United States have thus been pushed back to levels seen in 2022 or even early 2019. Without the significant upswing in German exports to the US following the Covid-19 pandemic until Donald Trump’s re-election in fall 2024, the downturn would have been even more painful.”
“Since US import tariffs are unlikely to return to previous levels anytime soon, the development in the third quarter of 2025 may represent an approximation of the ‘new normal’ for German exports to the US,” the study author Samina Sultan notes. “The development of German exports to the US has a significant impact on global exports for certain sectors. For motor vehicles and parts, the negative development in exports to the US accounts for nearly half of the global export decline. Losses in the US market are also a key factor behind the overall 3.3% drop in German machinery exports worldwide.”
In December, Volkswagen has stopped car production at one of its plants in Germany for the first time in the company’s 88-year history. The production line in Dresden is the one affected.
Volkswagen is preparing major changes to its development strategy. That is why VW’s future lineup in Europe and North America will be filled with cars organised according to the principle of a sequential hybrid. These are the so-called extended-range electric vehicles (EREVs), which are very popular in China but not yet widespread in Europe and North America.
Earlier, German defence manufacturer Rheinmetall said it is considering taking over one of Volkswagen’s soon-to-be-unused plants, as the arms maker seeks additional production capacity in Germany while domestic carmakers struggle (see Kallanish passim).
