European carmakers have absorbed €8 billion in tariff costs since President Trump increased import duties on European cars last year. Volkswagen reported the heaviest impact with €4 billion in US tariff costs this year alone, prompting the company to warn that "incremental cost measures will not be enough" and that it must "fundamentally reshape its business model" to cope.

The US raised duties from 2.5% to 27.5% last April before reducing to 15% after a trade deal. With Trump threatening to increase tariffs to 25% by early July if the EU fails to comply, German carmakers could face an additional €2.6 billion in costs next year. BMW's CEO expressed hope for a tariff discount deal for manufacturers producing cars in the US.

Automakers are scrambling to offset costs through various strategies, including potentially establishing US production sites. Audi's new Q9 luxury SUV, designed for US consumers, will face tariffs as it's produced in Bratislava. With European carmakers already struggling with Chinese competition and electric vehicle transition costs, the tariff pressure threatens to further squeeze industry profits already under significant strain.