The atomic sledgehammer that President Trump just delivered to the German auto industry simply cannot be overemphasized.  A 25% tariff on imported cars and car parts completely negates hundreds of billions in pre-positioned investment dollars by German auto companies in Mexico. 

To give scale to the impact on Germany, consider that German automakers currently have 330 automotive suppliers in Mexico according to information from VDA.  Audi (a subsidiary of Volkswagen) has no U.S. production sites; every Audi sold in America will be subject to a 25% tariff. The Audi brand access to the U.S. market was/is 100% dependent on Mexico, including for manufacturing the Q5 SUV, its top-selling U.S. model.

According to prior reporting from Politico, “Volkswagen’s most popular model for American consumers is the Tiguan, an SUV that is entirely manufactured in Mexico. The German automaker sold over 30,000 of the vehicles in the final quarter of last year, a nearly 50 percent year-over-year increase.”  But wait, it gets worse….

French-Italian-American automaker Stellantis is the most exposed of Europe’s automakers as it makes Jeep and RAM models in Mexico.

The tariffs will make European automakers’ Mexican factories completely redundant. They could make them in Germany for the same tariff impact. Making them in Mexico is now useless.  They were only being made/assembled in Mexico to gain access to the U.S. market without tariffs.