Why 78,000 German Auto Jobs Are Moving to America

Welcome to Issue #79 of The German Autopreneur.

Trump just struck a deal with Europe. And it's going to cost Germany big time.

Here's what happened: Last week, Trump and von der Leyen agreed on new trade terms. European cars now face 15% tariffs instead of 27.5%. Sounds like a win, right?

Wrong.

The price Europe paid is massive. EU tariffs on US cars drop to zero. And Europe promised $1.35 trillion in energy purchases and US investments.

The result? German automakers can now build cars cheaper in Alabama than in Stuttgart. A German expert predicts 78,000 automotive jobs will migrate to America. That's 10% of Germany's entire auto workforce.

What does this deal mean for European automakers? For companies? For employees? And most importantly: What strategy do they need now?

What's in the Tariff Deal and What Isn't

It all started in April with Trump's "Liberation Day." He imposed 10% tariffs on almost all EU imports. For cars, it was +25%. European automakers suddenly paid 27.5% instead of 2.5%.

The tariffs have already cost the auto industry billions. Volkswagen alone paid €1.2 billion in US tariffs in Q2.

After months of negotiations, both sides agreed:

• US imposes a base tariff of 15% on most EU exports, including cars

• EU gradually cuts its tariffs on US cars to 0%

• EU buys $750 billion worth of energy from the US

• European companies invest $600 billion in America

• Existing 50% tariffs on steel and aluminum remain unchanged for now

The problem? The EU can’t force private companies to invest or buy energy. That’s why Brussels calls this an "intention."

The Winners Are BMW and Mercedes

At first glance, German automakers have reason for relief: Tariffs drop from 27.5% to 15%. According to Bloomberg, this means about €4 billion saved for the European auto industry.

But look closer: The real winners are BMW and Mercedes. Both OEMs already build cars in US plants, which they export to Europe. Annually around 185,000 of their vehicles go back to Europe. With EU tariffs on US imports disappearing, these models get cheaper and more attractive.

Mercedes already builds some GLC models in Alabama. Now they want to move even more production there. Also for the European market. I’m sure BMW is considering a similar strategy.

An interesting detail: German automakers had hoped for an "offset mechanism." The idea behind this? Export a lot from the US, import more duty-free in return. But Trump and his advisors blocked this.

The Losers Are European Workers, Porsche & Audi

This deal will shift more production to the US.

A German expert puts it in this way: "Employees in auto and supplier industries are the losers. In the near future, 10% of German automotive jobs could move to the US."

German automotive employs 780,000 people. That means 78,000 jobs at risk.

Porsche and Audi will be hit hardest. Both brands import all their US models from Europe. Even at 15%, their cars become significantly more expensive for US buyers. Volkswagen is now considering US production for both brands.

This development is a win for Trump. He promised to bring industry back to America. And it seems to be working.

German Automakers Pay 6x More Than Before Trump

What's often overlooked: The 15% tariffs are lower than the 27.5%. But still 6x higher than the 2.5% before Trump.

These tariffs will permanently punish German automakers.

Mercedes has already lowered its profit forecast. Porsche and Volkswagen have also decreased their earnings estimations.

The German Automotive Society claims: "The 15% tariffs will cost companies billions annually."

And the deal has far-reaching consequences for production strategies. The "local for local" principle gets undermined. Instead, a new pattern might emerge: Build in the US, ship tariff-free to Europe.

Why Didn't Europe Negotiate a Better Deal?

The answer is painful: Europe simply didn't have the upper hand in the negotiation.

1. From a military perspective, Europe depends on the US. Their fear? Trump would question NATO or Ukraine support. This could have happened if the trade war escalated

2. Different EU states have different interests. France pushed for tough countermeasures. Germany and Italy wanted a quick deal. Mainly because of their car industries

3. The EU delayed its countermeasures too long. Instead of immediately imposing counter tariffs after "Liberation Day," they hoped for a compromise. The Financial Times later called this the "beginning of capitulation"

French Premier Bayrou even spoke of "submission." He wrote on X: "It's a dark day when an alliance of free people chooses submission."

The Federation of Germany Industries (BDI) says: "A 15% tariff rate will have huge negative effects on German industry." It demands the EU to prove its "power."

But the truth is: Europe doesn't have this power right now. Europe is economically still strong. But dependent on the US for military, energy and technology.

What Needs to Happen Now

Short and medium-term, European automakers have only one realistic option:

Move more production to the US. BMW, Mercedes, and Volkswagen already have concrete plans. Audi is considering building its own US factory.

Long-term, the trade war shows Europe must reduce its dependencies:

1. Develop technologies independently: Europe needs its own AI, batteries, semiconductors, and digital infrastructure

2. Strengthen defense: Military dependence makes you vulnerable to blackmail

3. Become energy independent: Don't get dependent on the US, like we were on Russian gas

4. Act united: Only a unified EU can achieve better deals

My Take

Here's the reality: Europe had no choice but to take Trump's deal.

We're economically strong. But otherwise dependent. As long as Europe doesn't reduce these dependencies, it remains vulnerable in negotiations.

We’ve been discussing a fundamental question for months in Germany: What responsibility do car companies here, have to their European locations?

The answer is tricky:

• On one hand, traditional automakers are global corporations with responsibility to their shareholders. They have to follow economic logic and produce where it's most viable

• On the other hand, they've shaped prosperity in Germany for decades. They're part of our national identity

This brings us back to the opening question: Should Germany save these 78,000 jobs?

Mercedes and Volkswagen are already demanding EU subsidies to preserve European jobs.

I think: That's the wrong approach.

Jobs shouldn't be artificially kept alive with taxpayer money.

These experts are needed where they create real value. Where they drive growth for Germany and Europe.

We already had this debate when jobs moved to China. Now this trend is accelerating towards the US.

Of course it hurts when the German auto industry relocates jobs.

But structural change is inevitable. The question is how to respond: Do we desperately try to preserve old structures? Or do we actively shape the transformation?

Stop throwing billions at yesterday's jobs. Time to invest in Europe's sovereignty instead. Because a competitive economy will create the jobs of tomorrow. No subsidies required.

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That's all for today.

Feel free to reply to this email with your thoughts.

Until next week,
— Philipp

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