U.S. Raises Tariffs on EU Cars and Trucks to 25% Next Week

The U.S. will increase tariffs on cars and trucks from the European Union to 25% next week, according to a statement from the U.S. administration. The announcement cited the EU's failure to comply with a previously agreed trade deal, though specific violations were not detailed.

This escalation occurs against a backdrop of global economic strain from the ongoing Iran war, which has driven up oil and natural gas prices due to disruptions in the Strait of Hormuz. The U.S. administration stated that the higher tariffs would encourage the EU to relocate factory production to the U.S. more quickly.

Reporters were told that the EU was not adhering to last year's trade framework as usual. The administration did not elaborate on the sources of tension.

Background on the Trade Agreement The trade deal, known as the Turnberry Agreement, was reached last July between the U.S. and European Commission officials. It established a tariff ceiling of 15% on most goods. However, a Supreme Court ruling this year invalidated the legal authority used for those tariffs, prompting the U.S. to impose a temporary 10% tax while investigating trade imbalances and national security concerns.

The Supreme Court determined that the president lacked authority to declare an economic emergency for imposing such tariffs on EU goods and other states. This ruling cast doubt on the agreement's status. The U.S. administration has since explored alternative measures, including potential use of Section 232 of the Trade Expansion Act of 1962, which allows duties on national security grounds.

“A deal is a deal," the European Commission said in February after the Supreme Court ruling. "As the United States’ largest trading partner, the EU expects the U.S. to honor its commitments set out in the Joint Statement”

The tariff increase arrives during a period of slowed global growth and higher inflation expectations, exacerbated by U.S. and Israeli strikes in Iran starting at the end of February. These actions effectively closed the Strait of Hormuz, contributing to rising energy costs.

Domestically, annual inflation reached 3.3% in March, higher than levels at the start of the current administration. Political pressure is mounting ahead of November's midterm elections, with only 30% of U.S. adults approving of the administration's economic handling, per a poll by The Associated Press-NORC Center for Public Affairs Research.

The administration had pledged to tame prices that surged after the coronavirus pandemic response. The EU-U.S. trade relationship has seen strains, including earlier threats related to Greenland and criticism of NATO allies' support for the Iran war.

Both sides had previously confirmed their commitment to the Turnberry Agreement.

Lincicome of the Cato Institute’s Center for Trade Policy Studies stated that the U.S. would likely invoke Section 232 for the tariff hike. He noted that similar 25% tariffs on foreign autos were imposed in March 2025 but later reduced under the trade framework. Lincicome described such agreements as relying on informal understandings.

“Trump’s threats are ‘just another example of why these trade deals are vaporware. They all rely on handshakes and winks and hopes that Trump doesn’t get mad about something,’’ Lincicome said. European Commissioner for Trade and Economic Security Maroš Šefčovič told reporters last week that U.S.-EU relations had improved over the past year. The European Parliament is expected to complete work on the agreement next month. The EU anticipated savings of 500 million to 600 million euros monthly for automakers under the deal. EU statistics show that U.S.-EU trade in goods and services totaled 1.7 trillion euros in 2024, averaging 4.6 billion euros daily. Neither U.S. nor EU officials responded to inquiries about the tariff increase or alleged violations.”

The alternative tariffs under consideration could risk violating the agreement, according to analysis. The EU has emphasized the need for competitive treatment without tariff increases beyond the agreed ceiling. The move follows the Supreme Court's restriction on emergency tariff powers.